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2009 Newsletter

Message from the Director

Welcome to the newsletter of Princeton University's Bendheim Center for Finance! We publish this newsletter annually in order to apprise our alumni, colleagues, friends and corporate affiliates of events, research and other developments of interest at the BCF.

The mission of Princeton University’s Bendheim Center for Finance is twofold: First, to develop new courses and programs in finance that will afford exciting learning opportunities to Princeton students; and second, to establish a leading center for modern financial research. Given the dynamic market conditions of the past year, this is one of the most exciting times for research and study of finance, although an extremely challenging time for our students seeking jobs and internships, as well as many of our alumni. In times like these, we especially appreciate the critical support of our Advisory Council and our Corporate Affiliates.

By bringing together outstanding scholars from a wide variety of disciplines in a well-equipped setting that encourages dialogue and interaction, the BCF is an ideal environment in which to conduct significant research in finance. It also serves as a major venue where the world’s leading experts in finance from academia, government, and the private sector can meet regularly to exchange views and information.

Proximity to Wall Street and other important centers of private-sector financial research provide an additional source of intellectual stimulation and interchange for the BCF. Students are able to explore internships and longer-term job opportunities in a wide variety of finance-related areas. The BCF also encourages students at all levels to conduct finance-related research at the University by providing such services as funding senior thesis projects, serving as a clearinghouse and major source of data, and providing expert faculty advisors.

The scholars in the BCF are chosen for their ability to deploy cutting-edge methodologies to a wide range of finance-related topics, from stock-price determination to public policy toward financial markets to the role of financial institutions in economic growth. The center supports these leading scholars by encouraging their individual, collaborative and multidisciplinary research and by providing facilities, including computer and data support, research assistance, financial resources and venues for the exchange of ideas (such as weekly seminars and conferences). The University’s existing strengths in areas such as economics, mathematics and statistics, operations research, computer science, psychology and public policy provide a serious disciplinary basis for this research, leveraging our resources to produce a truly distinguished program. To promote maximum interchange among disciplines, all center faculty have appointments in regular University departments as well as in the BCF. Twenty-eight faculty members, representing seven different departments, are currently affiliated with the BCF.

Our educational programs continue to do extremely well. Now in its tenth year, the Undergraduate Certificate in Finance has been an exceptionally successful, attracting record numbers of students. We enrolled 77 juniors from the Class of 2010, bringing our total number of undergraduate students in the program (juniors and seniors) to about 190 this year. The previous year, the program enrolled nearly 115 students, a number that was heavily stressing our limited advising resources, especially for senior theses or independent research in finance, one of the requirements of the program. We therefore decided to put in place tougher, grade-based, admission requirements into the UCF, to limit the size of the program to a more manageable level. Students earning the UCF are drawn from a wide cross-section of departments on campus, 16 in total for the Class of 2008. UCF students are an extremely talented subgroup of the already high-achieving Princeton classes. They continue to receive a high proportion of the prizes awarded each year by their respective departments.

At the graduate level, the sixth full class of the center’s Master in Finance (MFin) graduated in June 2008. Reflecting the interdisciplinary nature of the BCF, the MFin program is nearly unique in producing students with extensive training in both quantitative methods (drawing on the strengths of our engineering, computer science, mathematics, and other departments) and in economics. This set of skills makes our Master students highly sought after in the job market. The program is designed to be completed in four semesters, but students with strong backgrounds will be able to finish more quickly, in as little as one year.

Because business schools do not generally offer so specialized a program, or expect their students to have such a strong mathematical background, Princeton’s MFin offers students a significant advantage in obtaining coveted positions in investment banking, brokerage houses, and similar firms. BCF faculty also benefit from the program because it provides a forum in which they can develop an active intellectual interchange with leading private-sector financial researchers and practitioners.

We have continued to invest heavily in the placement of our graduating students. The networking efforts of our two dedicated placement advisors, the strong support from our Corporate Affiliates and Advisory Council, and the success enjoyed by our previous four graduating classes has been reflected in a strong demand for our 2008 graduates, all of whom accepted offers of permanent employment in financial firms. Our two-year students all accepted offers of summer internships from financial firms.

Our alumni have proved to be a tremendous source of support for the center and we are very grateful for it. Members of our Advisory Council have worked tirelessly to help us define our programs and reach out to the financial community under the leadership of Jeff Peek, chairman and CEO of the CIT Group, who serves as the Council's chairperson.

I hope you will find this newsletter informative. My colleagues and I look forward to hearing from you, and to your continued support.

Yacine Aït-Sahalia
Otto A. Hack 1903 Professor of Finance and Economics
Director, Bendheim Center for Finance


Top Stories

27 New MFin Students Join the Program. On August 25, 2008, 27 students from around the globe gathered at the Bendheim Center to attend a two-week math refresher course and a three-day introduction to the broad career possibilities of the Master in Finance degree. This ‘boot camp’ has been run under the auspices of the Bendheim Center for Finance for the past five years. (A list of the students and their resumes is available on this website.)

The math refresher course was taught by Bendheim Center for Finance and Economics Professor Wei Xiong. His efforts were extremely well received and appreciated by all the attendees.

Additional boot camp presenters shared their views on career opportunities, career paths and trends in their areas of expertise. John Massad, managing directorof BlackRock, discussed careers in quantitative asset management and shared tips for job seeking, while Bill Beatty, VP, Goldman Sachs, gave a broad overview of risk management. Joe Langsam, Managing Director & Head of Morgan Stanley’s IDEAS Modeling and Credit, and Eric Pan, Executive Director, IDEAS FX Strategy, discussed opportunities with this growing group of quantitative strategists at Morgan Stanley.

Toby Falk, Vice President, Risk and Quantitative Analysis of Credit Suisse, discussed how risk management has evolved in the current financial crisis, while Kian Estaghamat, vice president, JP Morgan, discussed the unique area of proprietary trading. Andy Golden, president of PRINCO, shared his views on careers within university endowments.

David Collins, founder of C3 Intelligence LLC, conducted a Career Exploration exercise with the students to help them better match their motivations, skills and personality with possible career options in finance.

To kick off the boot camp, a group of five recent Bendheim Master in Finance alumni returned to campus for a roundtable discussion and mock interviews. Returning graduates included Casey Carnathan, formerly of Merrill Lynch, Securitization Sales, Theo Kim, Princeton University Investment Company, Nestor Macias, Morgan Stanley, Latin America Structured Products, Chad Shampine, Citi, Short Term Rates Trading, Foreign Exchange, and Amar Sujanani, Credit Suisse, Structured Products Trading. They discussed what it takes to succeed in their areas of finance and shared their thoughts on best practices in interviewing techniques, their own career path and interests, and recommended methodology for job searches in this competitive environment.

David Blair and Wendell Collins, the Bendheim Center’s retiring and incoming Directors of Corporate Relations, presented tips and techniques on the ‘do’s and don’ts’ of placement and interviewing, and Blair gave a broad overview of the Investment Banking landscape.  Kathleen Mannheimer, Tony Chiappetta and Amy Pszczolkowski of Career Services discussed best practices for leveraging career support services available to Bendheim Master’s students, including a detailed overview of TigerTracks. Todd Hines also shared information on the resources available at the Economic and Finance Library.

From Wall Street (and Wacker) to Princeton

Here is just a sampling of the guest speakers from a variety of areas of finance who visited the Bendheim Center for Finance this fall to address our Master in Finance, undergraduate, and PhD students:

October 9 – Kathleen DeRose and Bob Morris, Hagin Investment Management

October 24 – Rob Merrilees, CEO of Spot Trading LLC, Chicago

Nov. 5 – David DeNunzio, Vice Chair, M&A, Credit Suisse, and Bendheim Advisory Council member

Nov. 13 – Bill Richards, Senior Client Relationship Manager, and Joanna Roth, UBS Hedge Fund Sales

Nov. 14 – Bendheim visits Morgan Stanley NYC: presentations, lunch and trading floor tour with Joe Langsam and IDEAS group

Dec. 2 – Merrill Lynch Quant 101 presentation at Bendheim Center byHeiko Ebens, Head of Global Equity Derivatives Research; Nitin Saksena, Associate, Equity Derivatives Research, Ren Shi, Associate, Credit Derivatives Research, and Michelle Yang, Associate, Equity Derivatives Research

Dec 5 – Terry Benzschawel, Managing Director, Citi Quantitative Credit Trading Strategies, Risk Management and Portfolio Analysis, & Analytical Tools.


Upcoming and Recent Events

Upcoming Events

Recent Events


Focus on Faculty Research

Yacine Ait-Sahalia's research continues to focus on the econometrics of high frequency data in finance, and especially jumps. His recent papers study questions such as determining whether jump processes are needed to model asset prices, how to optimize a portfolio when asset returns can jump, the modeling of contagion across markets, and how to disentangle the measurements of volatility and jumps. He has received a Guggenheim Fellowship for 2008-09. website…

Alexandre d’Aspremont’s research focuses on mean reversion (the oscillation of a portfolio of assets around a certain mean), which has received a very significant amount of attention as a classic indicator of predictability or statistical arbitrage in financial markets and is often apparent in equity index returns over long horizons. more…

Dilip Abreu has been recently focussing on his work in Game Theory. He is engaged in developing a methodology for equilibrium selection in a variety of dynamic games in which equilibrium multiplicity is rampant. His current work (co-authored with David Pearce) seeks to find "A Reputational Value for Stochastic Games". An earlier paper "Bargaining, Reputation and Equilibrium Selection in Repeated Games with Contracts" is forthcoming in Econometrica. more…

Alan Blinder's research spans topics ranging from monetary policy to offshoring, with recent commentaries on the credit crisis appearing in The New York Times (“From the New Deal, a Way Out of a Mess” and “How to Cast a Mortgage Lifeline?”) and The Washington Post (“The Fed Can’t Do It Alone”). Among his forthcoming papers are: “Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence,” with M. Ehrmann, M. Fratzcher, J. de Haan, and D. Jansen, in Journal of Economic Literature; and “Do Monetary Policy Committees Need Leaders? A Report on an Experiment,” with John Morgan, in American Economic Review Papers and Proceedings (May 2008). Blinder’s recent publications include: “Monetary Policy by Committee: Why and How?” in European Journal of Political Economy (March 2007), and “What Did You Learn from the International Financial Crises of the 1990s, Daddy?” in Eastern Caribbean Central Bank’s Economic Theory and Development Options for the Caribbean: The Sir Arthur Lewis Memorial Lectures (Randle: Kingston, Jamaica, 2007). Unpublished research includes Princeton University’s Center for Economic Policy Studies working papers, “How Many U.S. Jobs Might Be Offshorable?” (March 2007) and “Offshoring: Big Deal or Business as Usual?” (June 2007). Blinder delivered the keynote lecture, “On the Design of Monetary Policy Committees,” for the Bank of Norway research workshop Monetary Policy Committees (September 2007).  more…

Deciphering the liquidity crunch of 2007 is one of Markus Brunnermeier’s recent research projects. While the estimated losses in subprime mortgages between $200 to 300 billion US$ seem to be very large, they are relatively modest when put into perspective. more…

Rene Carmona's research remains focused on the applications of stochastic analysis to market models. He recently developed new dynamic models for the local volatility surface for which no-arbitrage conditions can be derived. He also worked on Monte Carlo methods for the quantification of rare events and developed new methods to compute small probabilities needed for the valuations of CDOs. more...

In a research project on the quantification of risk, Patrick Cheridito and his collaborators are developing new methods of measuring risk in situations where traditional risk measures such as value-at-risk or variance do not provide satisfactory answers. more…

Gregory Chow’s current research interest is in environmental problems with special reference to China. more…

Jianqing Fan’s research focuses on financial econometrics with emphasis on the analysis of high-frequency data, separating jumps from diffusion, estimating large covariance matrices for portfolio allocation and risk management, and sparse optimal portfolio allocation. more…

Harold James developed an extension of his previous work on globalization, examining the historical rise and fall of systems of rules in the international order, and the circumstances in which these rules are perceived as illegitimate and unjust. His book for Princeton University Press (The Roman Predicament, 2006) examines the paradoxical notion that while global society depends on a system of rules for building peace and prosperity, this system inevitably leads to domestic clashes, international rivalry, and even wars. As it did in ancient Rome, a rule-based world order eventually subverts and destroys itself, creating the need for imperial action. The result is a continuous fluctuation between pacification and the breakdown of domestic order. This argument, first put forth more than two centuries ago in Adam Smith's Wealth of Nations and Edward Gibbon's Decline and Fall of the Roman Empire, is applied to put current events (and especially discussions of trade and monetary rules) into perspective. website…

Burton Malkiel’s 9th edition of A Random Walk Down Wall Street was published in early 2007. His newest book From Wall Street to the Great Wall was published in December 2007. It covers direct and indirect strategies that investors can use to profit from China’s booming economy. more…

Stephen Morris, together with Hyun Song Shin and Franklin Allen of the University of Pennsylvania, recently published a study “Beauty Contests and Iterated Expectations”. website…

Ulrich Müller’s research focuses on time series econometrics. His recent work focuses on models with time varying parameters, and the development of econometric tools that are robust to correlations of largely unknown form. He was selected as a Alfred P. Sloan Research Fellow for the years 2008-2011. more…

John Mulvey develops and implements financial optimization models for leading institutional investors. Prominent examples include multi-strategies hedge funds, private-equity investments, large DB pension plans, and global re-insurance companies. more…

Birgit Rudloff's research deals with finding a risk minimal hedge. The concept of pricing and hedging in the Black-Scholes model is well known. But what happens if the underlying model is more complex, e.g., if we allow jumps in the asset price model, the volatility to be stochastic or transaction costs? Then, a perfect hedge as in the Black-Scholes model is not possible any longer. Convex and coherent risk measures are used and the optimal hedge can be found by using methods of convex analysis. In other areas of focus, Rudloff deals with portfolio optimization problems involving risk constraints and with risk measures in markets with transaction costs. website…

Jose Scheinkman’s recent research focuses on understanding long term risk-return tradeoffs, and on the origins of asset pricing bubbles. website…

Hyun Shin’s research focuses on the credit crisis of 2007 and renewed interest in the impact of rule changes on the accounting treatment of securities. more…

Chris Sims published a paper, joint with Tao Zha, in the American Economic Review, making the case that there has been more continuity in US monetary policy since 1960 than is assumed in most previous discussions. To reach this conclusion, the paper points out that it is essential to recognize that policy makers in the 70's were sensitive to the rate of growth of money stock, because of the influence of monetarist theory, and that the Volcker period 1979-1982 was one of sharply higher volatility of interest rates. Sims also continued his research on rational inattention, the idea that economic agents, in translating information into action, behave as finite capacity channels, in the sense of Shannon's information theory. website…

Ronnie Sircar has been working on developing stochastic models for i) valuation and hedging of credit derivatives; ii) equity option volatility smiles and skews and iii) valuation of employee stock options (ESO). more…

Ken Steiglitz has authored a book scheduled for publication in March 2007 entitled “Snipers, Shills and Sharks: eBay and Human Behavior” Princeton University Press. more…

Lars Svensson is on leave and Deputy Governor at Sveriges Riksbank, Sweden’s central bank. Together with Andrea Ferrero and Mark Gertler, in the paper "Current Account Dynamics and Monetary Policy," he explores the implications of current-account adjustment for monetary policywithin a two-country model of the US and the rest of the world. more…

One of Wei Xiong’s current research focuses is to extend the prevailing representative-agent based asset pricing framework to incorporate important interaction effects between heterogeneous participants in asset markets. more…


Student News

Ph.D. students in the Bendheim Center for Finance are admitted through the Department of Economics, the Department of Operations Research and Financial Engineering or the Program in Applied and Computational Mathematics. Seven students graduated in 2008. Our students continue to achieve high quality placements which will further raise the visibility of the Center in the world of academic finance and industry.

  • Kevin Amonlirdviman received his Ph.D. from the economics department. His dissertation studied the role of pessimism in household macroeconomic expectations. He has accepted a position as a consultant to BC6 in France.
  • Julio Cacho-Diaz received his Ph.D. from the economics department. His dissertation studied the identification of and infer­ence for jumps using hedge fund returns. He has accepted an associate position with Ziff Brothers Investments in New York City.
  • Hakan Kaya received his Ph.D. from operations research and financial engineering. His studies focused on management of weather risks in commodity markets. He joined the Quantitative Investments Group at Lehman Brothers as a senior associate
  • Leonard Kostovetsky received his Ph.D. from the Department of Economics. His thesis studied how the rise of hedge funds and socially responsible investing has affected the money management industry. He has accepted a position as an as­sistant professor of finance at the University of Rochester’s Simon Graduate School of Business in Rochester, New York.
  • Martin Oehmke received his Ph.D. from the Department of Economics. His thesis analyzed large collateral liquidations that follow the defaults of large traders, such as hedge funds. He has accepted an appointment as an assistant professor in the finance department at Columbia University in New York City.
  • Filipos Papakonstantinou received his Ph.D. from the Department of Economics. His dissertation studied boards of directors of corporations and whether different structures lead to different returns. He has accepted an assistant professor posi­tion at the Imperial College in London.
  • E. Glen Weyl graduated this year with his Ph.D. in economics, a year after graduating as valedictorian of his undergraduate class at Princeton. His research ranges from antitrust economics of the credit card industry to the foundations of the liberal theory of individual rights. In July he began a three-year term as a junior fellow at the Harvard Society of Fellows, as well as a yearly visiting position at the Toulouse School of Economics.


Alumni News

2008 Master in Finance Graduates — Where are they Now?

  • Black Rock Financial Management
  • Citadel Investment Group
  • College Road Capital LLC
  • Crédit Suisse
  • Goldman Sachs
  • JPMorgan Chase
  • Barclays Capital
  • Merrill Lynch
  • Morgan Stanley
  • Morgan Stanley (Asia Pacific)
  • NRG Energy
  • Silvercrest Asset Management
  • Susquehanna International Group
  • Two Sigma Investments


Corporate Affiliates

We are pleased to recognize renewed Corporate Affiliates to the Bendheim Center for Finance in 2008:

  • Barclays Capital
  • Goldman Sachs
  • Citadel