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Thursday March 22, 2012 at 11:00am
Presented by Marti G. Subrahmanyam, Professor of Finance, Economics and International Business at NYU Stern
Summary:
Concerns have been raised, especially since the global financial crisis, about whether trading in credit default swaps (CDS) increases the credit risk of the reference entities. We use a unique, comprehensive sample covering 901 CDS introductions on North American corporate issuers between June 1997 and April 2009 to address this question. The evidence from the study shows that:- The probability of credit rating downgrade and the probability of bankruptcy both increase after the inception of CDS trading.
- Bankruptcy risk increases even further with the amount of CDS outstanding.
- CDS effect is more severe for CDS that excludes restructuring as credit event.
- CDS trading increases the level of participation of bank lenders to the firm. Higher participation may lead to coordination problems and increase the probability of bankruptcy.
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Wednesday February 15, 2012 at 11:00am
Presented by Edward Altman, Professor of Finance at NYU Stern
Summary:
In a special "Insight" piece for the Financial Times on June 21, 2011, Professor Edward Altman predicted that the next European country to be hit with a financial crisis would be Italy. Three weeks later, that country's cost of financing spiked and the ECB had to step in to buy its bonds. In this Webinar, Dr. Altman will explain his new "Bottom-Up" approach to assessing default risk of sovereigns and also present his outlook for corporate high-yield default and recovery rates for 2012.
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Wednesday December 14, 2011 at 12:00pm
Presented by Stijn Van Nieuwerburgh, Professor of Finance at NYU Stern
Summary:
European bank regulators treat all sovereign bonds as if they were riskless for computing Basel capital requirements, and the European Central Bank continues to accept all of them as collateral. This encourages banks to hold too much sovereign debt, and to tilt their portfolios toward riskier bonds that pay a higher yield. The result is poorly diversified banks and excessive exposure to the riskier sovereigns.
When the crisis came, this situation turned into a diabolic feedback loop. Doubts about the solvency of the sovereigns fed doubts about the solvency of the banks. Sovereigns, in turn, felt compelled to rescue their banks with public funds, justifying the initial fears about national default.
Breaking free from this trap required banking regulation under which sovereign bonds possess risk-weights that reflect their true risk. European banks would then become better diversified and hold less sovereign risk, stopping the contagion to sovereigns.
We propose that these objectives can be accomplished by creating "European Safe Bonds" that banks can hold and that the ECB accepts as collateral. Such bonds would help meet the worldwide hunger for safe assets, particularly in times of crisis, when investors seek a safe haven. European Safe Bonds would be liquid and would lower the borrowing costs for all euro-zone sovereigns.
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Wednesday December 5, 2011 at 12:00pm
Presented by Robert Engle, Professor of Finance at NYU Stern
Summary:
The webinar will discuss the recently released 'NYU Stern Global Systemic Risk Rankings' and their role in deciding how to regulate 'too-systemic-to-fail' institutions to avoid the next crisis. The global ratings complement the NYU Stern Systemic Risk Rankings (released in April 2010) that tracks the largest U.S. financial institutions and the risk they bring to the financial system.
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Wednesday October 26, 2011 at 12:00pm
Presented by Hersh Shefrin, Professor of Finance at Santa Clara University, faculty member Master of Science in Risk Management Program at NYU Stern
Summary:
No physical events, such as a tsunami, war, or climate change precipitated the global financial crisis, whose effects will continue for many years. Instead, the root cause of that crisis was psychological. In the events which led up to the crisis, heuristics, biases, and framing effects strongly influenced the practice of risk management within key financial firms and rating agencies. Examples involving Merrill Lynch, UBS, Citigroup, Standard & Poor’s, and AIG illustrate this point. The associated risk management practices represent low hanging behavioral fruit. There are also deeper structural behavioral issues lying at the intersection between the financial system and political system.
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Presented by Hersh Shefrin, Professor of Finance at Santa Clara University, faculty member Master of Science in Risk Management Program at NYU Stern
Summary:
Based on the joint work with Enrico Cervellanti, University of Bologna this presentation covers a behavioral analysis of BP, whose risk management practices in respect to capital budgeting decisions during the last decade have resulted in a series of high profile accidents, including the worst environmental disaster in U.S. history. The analysis uses BP as a vehicle to discuss the application of business processes and psychological pitfalls to analyze corporate culture, especially in respect to risk management. The presentation identifies weaknesses and vulnerabilities in BP's culture, makes comparisons with the corporate financial practices at other firms and offers suggestions about how BP can engage in debiasing. A key point is that insufficient knowledge of behavioral decision making resulted in analysts, investors and regulators attaching insufficient emphasis to the risks in BP's operations.
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Presented by Ingo Walter, Vice Dean of Faculty, Seymour Milstein Professor of Finance, Corporate Governance and Ethics and academic director of the Master of Science in Risk Management Program at NYU Stern
Summary:
Professor Ingo Walter talks about some managerial requisites for dealing with both reputational risk and conflicts of interest. Banks, ratings agencies, insurance companies, policy makers and regulators are a few of the actors grappling with questions surrounding the balance between market discipline and market regulation in controlling conflicts of interest and reputational capital. The webinar discusses:
- Sources of reputational risk facing financial services firms.
- Link between reputational risk and exploitation of conflicts of interest in financial intermediation.
- How to measure reputational losses.
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Presented by Stijn Van Nieuwerburgh, Associate Professor of Finance, Yamaichi Faculty Fellow, faculty member Master of Science in Risk Management Program at NYU Stern
Summary:
Professor Stijn Van Nieuwerburgh describes the origins of the U.S. housing finance system, with a special emphasis on the role of the GSEs-Fannie Mae and Freddie Mac. Further, he discusses how the GSEs became some of the most systemically risky institutions in the entire financial sector and how they became involved in a race to the bottom with the private sector's large complex financial institutions. He also discusses the crisis and conservatorship episode. Finally the presentation covers a proposal for how to fix the U.S. housing finance system and contrast it with the U.S. Treasury's recently released proposal.
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Presented by Matt Richardson,Charles Simon Professor of Applied Financial Economics, faculty member Master of Science in Risk Management Program at NYU Stern
Summary:
Professor Matt Richardson provides an overall assessment of the financial reforms, specifically the Dodd-Frank Act. He talks about:- The primary causes of the financial crisis,
- First principles in terms of how economic theory suggests we should regulate the financial sector.
- An economic appraisal of the Act's strengths and weaknesses, and a careful examination of key omissions within the Dodd-Frank Act.
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Presented by Michael Pinedo,Julius Schlesinger Professor of Operations Management Chair, Department of Information, Operations, and Management Sciences, faculty member Master of Science in Risk Management Program at NYU Stern and Marcelo Cruz faculty member Master of Science in Risk Management Program at NYU Stern.
Summary:
Professor Michael Pinedo and Professor Marcelo Cruz discuss developing an operational risk framework with a very strategic focus similar to those of market and credit risks. During the webinar, they stress estimating a capital number to make regulators happy is not the end game and the importance to understanding how manageable factors impact the capital and risk sensitivities and serve to guide senior management in the strategic management of the firm.
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Presented by Viral Acharya, ,C.V. Starr Professor of Finance Bank and Financial Analysts Faculty Fellow, faculty member Master of Science in Risk Management Program at NYU Stern
Summary:
Presented byProfessor Viral Acharya discusses the forthcoming regulation and addresses the questions: Why should corporations and financial firms care more about aggregate risk or the economic cycle going forward? What are the new "stress scenarios" implied by the recent crisis? Implications of proposed systemic risk regulations for financial firms, their cost of capital, liquidity risk management, and in turn, for similar issues in case of corporations. Should financial firms be concerned about systemic risk over and above its regulatory and liquidity implications, for example, due to counterparty risk issues? If yes, why and how? How should firms manage their liquidity risk over the cycle? Is cash the "king" for dealing with aggregate risk? Which banks can firms rely on for lines of capital?
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