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.
Under the aegis of the BCF, Princeton’s existing finance curriculum is being dramatically expanded and improved, and two new academic programs have been created: an Undergraduate Certificate in Finance in 1999 and a Master Program in Finance in 2001. Center-affiliated faculty teach in both programs as well as in a variety of contexts in their home departments across the University. 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 ninth year, the Undergraduate Certificate in Finance has been an exceptionally successful, attracting record numbers of students. We enrolled 125 juniors from the Class of 2009, bringing our total number of undergraduate students in the program (juniors and seniors) to about 260 this year. The previous year, the program enrolled nearly 350 students, a number that was heavily stressing our limited advising resources, especially for senior theses or independent research in finance, one of the requirement of the program. We therefore decided to put in place tougher, grade-based, admission requirements into the UCF, in order to limit the size of the program to a more manageable level. The reduced size of the UCF provides an even better experience for students and faculty alike. Students earning the UCF are drawn from a wide cross-section of departments on campus, 19 in total for the Class of 2007. 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. Princeton's Valedictory Oration was presented this year by Eric Weyl, one of our UCF recipients.
At the graduate level, the fifth full class of the center’s Master in Finance (MFin) graduated in June 2007. 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 2007 graduates, all of whom accepted 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.
Otto A. Hack 1903 Professor of Finance and Economics
Director, Bendheim Center for Finance
31 New MFin Students Join the Program
On August 27, 2007, a record 31 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. Speakers included John Massad, managing director of BlackRock, who discussed careers in quantitative asset management and shared tips for job seeking, while John Shapiro, managing director, Morgan Stanley illuminated the possibilities of quantitative work in commodities and energy trading. Merrick Chung, senior associate of Credit Suisse shared his thoughts on possible careers in alternative investments, Kian Estaghamat, vice president, JP Morgan discussed the unique opportunities available in proprietary trading, and Andy Golden, president of PRINCO, shared his views on careers with university endowments.
Ben Dattner, founder of Dattner Consulting LLC and a Columbia University professor of organizational behavior, shared tips with the students on interviewing and networking, including how to better leverage helpful websites and web tools.
To close the boot camp, a group of five recent Bendheim Master in Finance alumni returned to campus for a roundtable discussion. Returning graduates John Naud of JP Morgan's proprietary trading desk, Matthieu Philip of JPMorgan Statistical Arbitrage, Theo Kim of Princo, Dave Steckl of Merrill Lynch's derivatives sales desk, and Amar Sujanani of Credit Suisse’s Derivative structuring and trading focused on interviewing techniques, their own career path and interests, and recommended methodology for job searches.
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, Graduate Student Career Services, discussed best practices for leveraging career support services available to Bendheim Master’s students, including a detailed overview of TigerTracks. Bobray Bordelon shared information on the resources available at the Economic and Finance Library.
Thank you to David Blair for the organization of the boot camp.
On November 17, first-year Master in Finance students received a refresher course at Mini Boot Camp, featuring the first ever Wall Street/Bendheim Bee, an interactive quiz using the book, Wall Street Words, as a helpful primer.
Following the “bee” was a roundtable discussion with returning alumni Flora Chao of Morgan Stanley Investment Banking, Gaetan Ciampini of Lehman’s asset backed securities research group, Chad Shampine of Citigroup's forex group, Casey Carnathan of Merrill Lynch credit sales & trading, and Theo Kim of PRINCO, plus another round of mock interviews to ready the students for their summer internship search.
A view inside BlackRock
Five Bendheim Master in Finance students had the unique opportunity to spend their week-long break between the Fall and Spring semesters with a variety of BlackRock business groups and get an insider’s view of the types of asset management careers available to them post-graduation.
The students — Sujay Davuluri, Nicolas Cojacaru-Durand, Ying Chiat-Ho, Aaron Katz, and Tong Zhao — actively accompanied various BlackRock leaders from the Institutional Asset Management Group, the International Asset Management Group, Leveraged Finance, BlackRock Solutions-Portfolio Analytics Group, and BlackRock Solutions-Risk and Quantitative Analysis group in Princeton.
"We are very pleased to support the Bendheim Center and we were very impressed by the knowledge, skills and aptitude of the students that participated" commented BlackRock Managing Director John Massad ’83.
“During the week, I was given the chance to gain an inside view of work in the account management department and see first hand, how BlackRock functions as an entity,” said Chiat Ho, a Master in Finance student from Singapore. “One of the things that impressed me the most was the dedication that the people I worked with put into doing their work well.”
Katz, who worked at the Federal Reserve of NY before coming to Bendheim, noted, “I appreciated how they took the time to show me around and talk to me about what they were doing. It was especially interesting to be with them at such a unique time in the high-yield markets.”
Each day, the New York-based “winterns” had the chance to observe the BlackRock Portfolio Management Group’s daily markets meeting at 8 a.m., as well as participate in several lunch-and-learns with the firm’s senior management.
- Mini-Course on Financial Modeling, Valuation and Analysis using Excel, VBA and C++, November 17, 19 & 24, December 1, 3, 8 and 10
- The Promise of Socially Responsible Investing, November 14-15, 2008
- Princeton Lectures in Finance, November 3-5, 2008
- Conference on Implied Volatility Models, October 10-11, 2008
- Fourth Cambridge-Princeton Conference, September 19-20, 2008
- Stochastic Analysis and Applications, June 13-15, 2008
- Second Princeton Credit Risk Conference, May 23-24, 2008
- Second New York Fed - Princeton Liquidity Conference, December 13, 2007
- Mini-Course on Financial Modelling, Valuation and Analysis Using Excel, VBA and C++, November 27 and 28, December 3, 4, 12, 13 and 17, 2007
- Fourth CCCP Mathematical Finance Workshop, November 30 - December 1, 2007
- Humboldt-Princeton Conference: Semiparametrics Meets Mathematical Finance, October 27-28, 2007
- Princeton Lectures in Finance, October 17-19, 2007
- Conference on Likelihood Methods in Finance, October 12-13, 2007
- Third Cambridge-Princeton Conference, September 21-22, 2007
- Conference on Rethinking Business Management: An Examination of the Foundations of Business Education, May 17-19, 2007
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 policy within 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…
2006 Master in Finance Graduates – Where are they Now?
Lehman Brothers hired the largest group of Master in Finance graduates in 2007, all in NYC
- Salim Khan and Duygu Goezeler joined the Fixed Income research team
- Gautam Gururaj is in Prime Brokerage;
- Brad Ayres joined Asset Backed Securities;
- Aaron Yunis works in Structured Volatility;
- Anne-Gabrielle Laboureau is in Energy Trading
Four students joined Government of Singapore entities:
- Rui Xiong Kee
- Tze Hui Lim
- Qiuwei Lin
- Wen Hao Jonathan Ng
Two grads accepted offers from JPMorgan in NYC
- Asad Merchant in asset management
- Matthieu Philip in proprietary trading
A variety of graduates joined leading firms throughout New York and the globe:
- Boyan Kostadinov joined the QSI program at Credit Suisse NYC
- Dan Schoenherr works in asset management at Goldman Sachs in NYC
- Casey Carnathan joined derivative sales at Merrill Lynch NYC
- Ivailo Arsov works in credit research/economic forecasting at the Reserve Bank of Australia in Sydney
- Bill Lyman is practicing derivatives law at Sidley & Austin NYC
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. Four students graduated in 2007. 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.
- Carlos Viana de Carvalho graduated from the Department of Economics. His thesis studied the implications of heterogeneity in price setting behavior on the part of firms for aggregate dynamics. He has accepted a position at the Federal Reserve Bank of New York.
- Sylvain Champonnois graduated from the Department of Economics. His thesis,“Financial Architecture and Corporate Investment,” studied the role of financial architecture for corporate investment. He accepted a position of assistant professor at the Rady School of Management at UC San Diego.
- Tal Fishman graduated from the Department of Economics. His thesis studied market manipulation via voluntary disclosure by informed traders and the ability of smart traders to eliminate mispricings in the stock market. He has accepted a Quantitative Research Associate position with Parkcentral Capital Management, a hedge fund, in the Chicago area.
- Yosuke Yasuda graduated from the Department of Economics. His thesis, "Essays in Theoretical Industrial Organization," studied the efficient design of license auctions and school choice mechanisms. He accepted a position of assistant professor at the National Graduate Institute for Policy Studies in Tokyo, Japan.
On the Move with Bendheim Alumni
- Youssef Benomar moved from Dresdner Kleinwort London to JP Morgan London in April 2006, joining the Global Equity Proprietary Trading team where he is co-responsible for the Macro/Volatility trading strategies.
- Adam Lutz left Dean and Company in 2004 and has been working with DC Energy, a proprietary trading firm with a focus on energy derivatives and is now a principal there.
- Frank Shen left his research job in Barclays Capital in 2007 and is currently on the CDO desk of Citigroup.
- Marc Wiznia *06 recently joined Prudential Financial's corporate development department as an associate, and previously was an analyst in CIT Group's corporate development group.
We are pleased to welcome several new Corporate Affiliates to the Bendheim Center for Finance in 2008:
- Prediction Company, LLC - A subsidiary of UBS AG, based out of Santa Fe, NM
Prediction Company was founded in 1991 by Doyne Farmer, Norman Packard and Jim McGill. Based on their earlier work in chaos theory and complex systems, Packard and Farmer felt the financial markets were an example of a highly complex system that would be amenable to predictive technology.
In 1992 Prediction Company signed an exclusive five year deal to provide predictive signals and automated trading systems to O'Connor and Associates, a Chicago based derivatives trading firm. In 1994 O'Connor was purchased by Swiss Bank Corporation, which then merged with the Union Bank of Switzerland to create “UBS,” one of the world's largest financial institutions.
In 2005 UBS purchased Prediction Company and operates it as a wholly owned susidiary. Prediction Company remains self-directed and locally managed. Prediction Company continues to develop financial models and automated trading systems used for proprietary trading by UBS.
- FreddieMac joined as an affiliate in May 2007
Thank you to these generous alumni:
- Kathleen Traynor DeRose ’83 is creating the Kathleen Traynor Research Fund at the BCF for the purpose of helping women students in finance.
- BCF Advisory Council member Al Hurley ’75, Vice Chairman of Emigrant Bank, is also making a gift to support the Master in Finance program.