The Center supports research on quantitative methods to measure and control risk in financial and commodities markets and other contexts.
Lisa Goldberg joins Berkeley Research Group
Asness, Frazzini and Pedersen publish a long Letter to the Editor of the Financial Analysts Journal contesting the findings of Anderson, Bianchi and Goldberg's prize-winning paper, "Will My Risk Parity Strategy Outperform?" Read their letter and our response.
Lisa Goldberg appointed a judge for the Moskowitz Prize for Socially Responsible Investing
The CFA Institute is holding a Webinar on Thursday March 28 at 9:00am Pacific Time (noon EDT), featuring Lisa Goldberg speaking on her paper (joint with Robert Anderson and Stephen Bianchi), "Will My Risk Parity Strategy Outperform?" You can join the webinar at this link: CFA Institute Webinar, Will My Risk Parity Strategy Outperform?
The award, which was given March 1, 2013 by Financial Analysts Journal, recognizes excellence in research and financial writing. The award was given to Center Director Robert M. Anderson, Affiliated Graduate Student Stephen W. Bianchi, and Director of Research Lisa R. Goldberg, for their paper, "Will My Risk Parity Strategy Outperform?"
Counterparty Credit Risk is a must-read for anyone interested or involved in counterparty credit risk (CCR); it is one of the first comprehensive, well-written books on this topic, which has become increasingly important after the recent financial crisis. Jon Gregory effectively covers all the practical aspects of CCR and illustrates its importance as one of the key drivers of the 2007-2009 credit crisis. First published in 2010, Counterparty Credit Risk has created some practical consensus among financial institutions and practitioners on how to define, measure, manage, and reduce counterparty credit risk. It has also motivated valuable research, which would hopefully lead to managing the part of systemic risk arising from the over-the-counter (OTC) derivatives market.
The downside risk CAPM (DR-CAPM) can price the cross section of currency returns. The market-beta differential between high and low interest rate currencies is higher conditional on bad market returns, when the market price of risk is also high, than it is conditional on good market returns. Correctly accounting for this variation is crucial for the empirical performance of the model. The DR-CAPM can jointly explain the cross section of equity, commodity, sovereign bond and currency returns, thus offering a unified risk view of these asset classes. In contrast, popular models that have been developed for a specific asset class fail to jointly price other asset classes.
Finance and financial markets were at the heart of the global economic crisis that began in August 2007. Despite having subsided elsewhere by 2010, the global crisis left an ongoing legacy of turbulence in the euro zone. My argument in this essay is that the euro zone’s continuing turmoil, like that of the world economy in 2007‐09, is rooted in financial vulnerabilities that were not well envisioned in the defenses set up by EMU’s architects. If the euro is to survive, EMU’s institutions must evolve to overcome these vulnerabilities. The necessary changes will have profound effects on the future shape of EMU, effects significant enough to require changes in EU political arrangements alongside more technical financial reforms.
The focus of this paper is to model and quantify the economic impact of insecure property rights on the equity risk premium. It should be noted that insecure property rights manifest themselves in many different forms. Here we are interested in insecure property rights that might lead to a collapse in real equity values that would not much affect the real values of bonds, especially government bonds. For example, if the U.S. government were to decide to put extraordinarily heavy taxes on corporate profits, dividends, or capital gains or to impose extraordinarily heavy regulatory burdens on corporations, those policies could redirect a substantial amount of cash flow away from shareholders without affecting bond values. The likelihood of such future tax increases or regulatory burdens narrowly targeted on corporate profits appears to be large enough to reconcile the current expected equity premium with a reasonable coefficient of risk aversion.
The Fung Center was created by a very generous donation from Coleman Fung, founder of Open Link Financial, Inc. (more)