Annual Report 2012 Swiss Finance Institute @ Epfl Table of Contents

ANNUAL REPORT 2012 SWISS FINANCE INSTITUTE @ EPFL TABLE OF CONTENTS

PART A: Self-evaluation Report

1. OVERVIEW p.6 2. Brief history p.7 3. General structure & governance p.9 4. Faculty p.10 4.1 Composition p.10 4.2 Mentoring and promotion of assistant professors p.10 5. Areas of competence p.11 6. Integration into the Swiss Finance Institute network p.12 7. Major collaborations p.14 7.1 University Finance Centre of Lausanne (CULF) p.14 7.2 Collaboration in macroeconomics p.16 7.3 NCCR FINRISK p.17 7.4 Collaboration with Princeton University p.18 7.5 Swissquote p.18 8. Organization and manpower p.19 8.1 Promotion of gender equity p.20 9. Bibliometric analysis p.21 10. Master program in financial engineering p.26 10.1 Study program p.26 10.2 Student admission procedures and statistics p.28 10.3 Program structure p.28 10.4 MFE versus the Master specialization “Statistics and financial mathematics” offered by the Mathematics Section of the EPFL School of Basic Sciences p.30 10.5 Initiatives to recruit more EPFL students for the MFE program p.30 11. Doctoral program in Finance p.32 11.1 First phase: foundation courses p.32 11.2 Second phase: PhD research p.32 11.3 Student support p.33 11.4 Student placement record p.33 11.5 Program structure p.34 12 Strategic priorities p.34 13 Outreach p.35 14 Budget p.38 15 Annex p.39 Annex 1. Finance research seminars at SFI@EPFL, schedule for 2012 - 2013 (sponsored by Unigestion) p.39 Annex 2. Brown Bag Seminars at SFI@EPFL p.40 Annex 3. Overview of industry internship projects conducted by MFE students p.42

2 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 PART B: Activity report 2007 - 2012 Peter Bossaerts Full Professor of Finance p.46 Pierre Collin-Dufresne Full Professor of Finance p.52 Rüdiger Fahlenbrach Associate Professor (with tenure) of Finance p.58 Damir Filipovic Full Professor, Swissquote Chair in Quantitative Finance p.62 Julien Hugonnier Associate Professor (with tenure) of Finance p.68 Luisa Lambertini Full Professor of International Finance p.72 Semyon Malamud Assistant Professor (tenure track) of Finance p.76 Loriano Mancini Assistant Professor (tenure track) of Finance p.80 Erwan Morellec Full Professor of Finance p.84 Anders Trolle Assistant Professor (tenure track) of Finance p.90

PART C: Student and Alumni Surveys

Introduction p.94 1. Profile data p.95 2. Educational background of respondents p.96 3. Employment overview p.97 4. Assessment of the SFI@EPFL master and PhD programs p.101 Conclusions p.107

PART A: Self-Evaluation Report SWISS FINANCE INSTITUTE @ EPFL 1 . OVERVIEW

The Swiss Finance Institute at EPFL (SFI@EPFL) In addition to these two existing teaching was created in 2009 with the dual mission of programs, which are discussed in more detail in promoting research excellence in the field of the following paragraphs, SFI@EPFL is planning finance and related disciplines while educating to develop a curriculum at Bachelor level. One outstanding students. The current research ac- important objective of these Bachelor courses tivities of SFI@EPFL focus on areas of strate- would be to recruit more EPFL students for the gic importance to EPFL, namely mathematical Master and PhD programs by arousing their in- finance, financial econometrics, and entrepre- terest for financial research at an early stage of neurial finance. These topics overlap significantly their studies. with the research interests of other faculty members on the campus (e.g. computer science, SFI@EPFL enjoys broad support from the mathematics, management of technology), which Swiss Finance Institute, Swissquote and the creates interesting cooperation opportunities NCCR FINRISK (National Centre of Competence and synergies. in Research in the field of Financial Valuation and Risk Management). Among other things, these It is the aim of SFI@EPFL to be recognized external funds provide finance for four faculty - both within and outside EPFL - as a center of positions: the Swissquote Chair in Quantitative competence in finance and related areas, as evi- Finance and three tenure track assistant denced by: professor positions in finance funded by the Swiss Finance Institute. • A strong academic record with publications in top journals Over the last five years, SFI@EPFL has been • Presentations at leading institutions ranked first among its peers in Europe in terms and conferences of research output measured as number of • Teaching programs in finance at all levels publications in top finance and mathematical (Bachelor, Master, PhD) finance journals per faculty. • Successful recruitment of top students and faculty SFI@EPFL aims for excellence in research, • Fundraising from public and private agencies education, and knowledge transfer. To meet these • Knowledge transfer (industry, policymakers, etc.) ambitions, it is critical that the institute further • Commitment to fostering interdisciplinary expands its research focus and diversity, which and inter-institutional research in finance will require the recruitment of additional faculty at EPFL. members in the short and medium term.

SFI@EPFL currently offers two highly selective teaching programs. The two-year Master Program in Financial Engineering (MFE) has been developed in response to increasing demand from the private sector for engineers who understand today’s complex financial market systems. It concludes with a six-month internship in the finance industry, which gives students their first opportunity to put their knowledge to work. The Doctoral Program in Finance (EDFI) is part of the Swiss Finance Institute PhD Program for the Léman Area and targets primarily students interested in pursuing academic careers. The program has an excellent placement record in both industry and academia.

6 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 2 . BRIEF HISTORY

SFI@EPFL was created in March 2009 as a new the same time as SFI@EPFL. During its short academic unit within the College of Management existence, CDM has witnessed several leadership of Technology (CDM), which itself was established changes and since September 2008 the College in 2004. CDM is one of the seven research depart- has been led by two ad interim directors1. ments of EPFL (see Figure 1). The only other unit within CDM is the Management of Technology and Entrepreneurship Institute (MTEI), established at

Figure 1: SFI@EPFL is part of CDM which was founded in 2004 as one of the seven research departments of EPFL. The other unit within CDM is MTEI.

COLLEGE OF HUMANITIES (CDH) SWISS FINANCE INSTITUTE AT EPFL (SFI@EPFL) COLLEGE OF MANAGEMENT OF TECHNOLOGY (CDM) MANAGEMENT OF TECHNOLOGY AND ENTREPRENEURSHIP INSTITUTE (MTEI) SCHOOL OF LIFE SCIENCES (SV) ECOLE POLYTECHNIQUE FÉDÉRALE SCHOOL OF COMPUTER AND COMMUNICATION SCIENCES (IC) DE LAUSANNE (EPFL) SCHOOL OF ENGINEERING (STI)

SCHOOL OF BASIC SCIENCES (SB)

SCHOOL OF ARCHITECTURE, CIVIL AND ENVIRONMENTAL ENGINEERING (ENAC)

1 Prof. Martin Vetterli, Professor for Communication Systems, EPFL (1.9.2009-31.12.2011) and Prof. Philippe Gillet, Vice-President for Academic Affairs, EPFL (1.1.2012 - present).

SELF-EVALUATION REPORT 7 At its outset, SFI@EPFL consisted of three result, the “University Finance Centre of Lausanne senior faculty members - Peter Bossaerts, Luisa (CULF)” (Centre universitaire lausannois en Lambertini and Erwan Morellec - and two newly finance) was created in 2010. An important idea developed teaching programs at Master and PhD behind this center is to facilitate interactions levels. An extensive hiring campaign initiated in between SFI@EPFL and the UNIL Institute of 2008 led to the recruitment of seven outstanding Banking and Finance by bringing together the new team members within a very short period (see researchers of both institutes under one roof. To Figure 2). In summer 2009, four tenure track as- this end, UNIL made office space for both insti- sistant professors (Rüdiger Fahlenbrach, Semyon tutes available in the EXTRANEF building on the Malamud, Loriano Mancini and Anders Trolle) UNIL campus. and one associate professor (Julien Hugonnier) joined the Institute, followed by two full profes- While the SFI@EPFL team experienced growth sors in 2010 (Damir Filipovic) and 2011 (Pierre from 2007 to 2011, it lost Peter Bossaerts to Collin-Dufresne). In 2012, one of the assistant the California Institute of Technology (Caltech) professors (Rüdiger Fahlenbrach) was promoted in 2012. Peter had already been Professor of to the rank of tenured associate professor. Finance at Caltech before he came to EPFL in 2007. In 2009, he opted for a joint appointment In 2009, EPFL and the University of Lausanne with EPFL (20%) and Caltech (80%) and this year, (UNIL) signed an agreement with the aim of car- he resigned from his EPFL position to return rying out coordinated research and teaching ac- permanently to Caltech. tivities in the area of finance and economics. As a

Figure 2: Historical overview of SFI@EPFL. 2007: Recruitment of P. Bossaerts (PO) and L. Lambertini (PA). 2008: Recruitment of E. Morellec (PO). 2009: Official creation of SFI@EPFL; recruitment of R. Fahlenbrach, S. Malamud, L. Mancini & A. Trolle (PATTs) as well as J. Hugonnier (PA); promotion of L. Lambertini to PO; P. Bossaerts reduces appointment percentage to 20%. 2010: Recruitment of D. Filipovic. 2011: Recruitment of P. Collin-Dufresne. 2012: Promotion of R. Fahlenbrach to PA; departure of P. Bossaerts. FTE stands for full time equivalent.

10 9 8 3 7 4 6 4 5 4 2

FTE 1 4 1 3 1 1 2 1 4.2 4 1 3.2 1 2 2.2 0 2007 2008 2009 2010 2011 2012

SFI@EPFL in EXTRANEF building on UNIL campus CDM in Odyssea MTEI in Odyssea building

Full professors (PO) Associate professors (PA) Tenure-track assistant professors (PATT)

8 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 GENERAL STRUCTURE 3 . & GOVERNANCE

The structure and organization of CDM and its and share some committees (e.g. Academic Pro- two institutes, SFI@EPFL and MTEI, are defined motion Committee, Research Committee, IT & in the ordinance “Rules and Regulations of CDM” Communication Committee). which was amended in 2009 and can be visited at the following internet address: http://polylex. Since January 2011, SFI@EPFL is directed by epfl.ch/files/content/sites/polylex/files/recue- Damir Filipovic, who succeeded Erwan Morellec. il_pdf/ENG/1.2.7_r_organisation_cdm_en.pdf. The institute director plays an important role as The principal governing body of CDM is the spokesman to the CDM director for all matters Comité de Direction (Executive Committee) com- concerning the institute’s strategic lines and its prising the CDM director, the two institute direc- financial and human resource management. The tors and the CDM administrator. Meetings of the directors of the MFE master program and EDFI Comité de Direction are held on a regular basis doctoral school are Julien Hugonnier and Pierre (usually monthly) to exchange information and dis- Collin-Dufresne respectively (previous directors cuss strategic matters concerning both institutes. of EDFI: Damir Filipovic, Erwan Morellec). They The second governing body is the CDM Council are responsible for the overall management, co- made up of faculty members, students, scientific herence and quality of the two teaching programs staff members and administrative representa- and provide advice and guidance for students. tives from both institutes. The Council advises on all matters related to the organization of the SFI@EPFL attaches great importance to par- College and its teaching programs and partici- ticipative decision-making and all important pates in decisions taken by the CDM Comité de issues and initiatives are openly discussed at Direction. faculty meetings. Such meetings are usually held when necessary and all faculty members and SFI@EPFL and MTEI have their own Master senior scientists are invited to participate and en- and PhD programs and organize separate semi- couraged to voice their opinion. Major decisions nar series (see Figure 3). Although managed concerning the institute are usually made by the independently, the two institutes interact regularly faculty body as a whole.

Figure 3: Although managed independently, SFI@EPFL and MTEI share a general service unit and certain committees.

COLLEGE OF MANAGEMENT OF TECHNOLOGY CDM DIR. A.I PHILIPPE GILLET CDM GENERAL SERVICES (IT SUPPORT, ADMINISTRATOR, HUMAN RESOURCES)

CDM COUNCIL

SWISS FINANCE INSTITUTE AT EPFL MANAGEMENT OF TECHNOLOGY AND SFI@EPFL ENTREPRENEURSHIP INSTITUTE MTEI DIR. DAMIR FILIPOVIC DIR. THOMAS WEBER

MASTER IN FINANCIAL MASTER IN MANAGEMENT, ENGINEERING MFE TECHNOLOGY & ENTREPRENEURSHIP MTE DIR. JULIEN HUGONNIER DIR. MARC GRUBER

DOCTORAL PROGRAM IN FINANCE DOCTORAL PROGRAM IN EDFI MANAGEMENT OF TECHNOLOGY EDMT DIR. PIERRE COLLIN-DUFRESNE DIR. DOMINIQUE FORAY

SFI@EPFL SEMINAR SERIES MTEI SEMINAR SERIES

JOINT COMMITTEES

SELF-EVALUATION REPORT 9 4 . FACULTY

4.1 Composition standing of "how things work" in academia and need guidance in planning their career. SFI@ The SFI@EPFL faculty body is made up of nine EPFL places high importance on the successful full-time professors consisting of two-thirds integration of assistant professors and our senior senior and one-third junior scholars, which we faculty members devote considerable time and consider an ideal ratio to ensure the smooth func- effort to providing advice and assistance with tioning of the Institute (see Figure 4). Employed manuscripts, teaching duties, grant applications at EPFL since mid-2009, the three tenure track and general research questions. In addition, SFI@ assistant professors will undergo a mid-term EPFL’s flat hierarchy and “open door policy” en- review at the end of this year and may initiate courage regular exchanges and many important the process of consideration for promotion to conversations between seniors and juniors take associate professor and tenure in summer 2015 place spontaneously over a cup of coffee or lunch. (at the end of their sixth year). This may lead to a spate of promotions - or departures - in 2016. With regard to the promotion and tenure Both cases will leave the Institute without junior review of assistant professors, CDM (responsible faculty if no new assistant professors are hired for the first level review) and EPFL (responsible in time. for the second level review) have clearly defined and transparent criteria and procedures. These guidelines are described in specific documents 4.2 Mentoring and promotion readily available on the Internet (see: http://cdm. of assistant professors epfl.ch/committees and http://polylex.epfl.ch/) and we encourage our junior professors to Assistant professors of finance are usually hired familiarize themselves with these as soon as directly after receiving their doctoral degree. possible. This means that they generally have little under-

Figure 4: The SFI@EPFL faculty body is made up of a balanced mix of two-thirds seniors and one-third juniors.

ASSOCIATE PROFESSORS (PA) Rüdiger Fahlenbrach Ph.D. in Finance (Wharton School, 2005) Julien Hugonnier FULL PROFESSORS (PO) Ph.D. in Finance (University Sorbonne, 2001) Pierre Collin-Dufresne Ph.D. in Finance (HEC Paris, 1998) Damir Filipovic Ph.D. in Mathematics (ETH Zurich, 2000) PA 22% Luisa Lambertini Ph.D. in Economics (University California, 1995) PO 45% Erwan Morellec PATT 33% Ph.D. in Finance (HEC Paris, 1999)

TENURE TRACK ASSISTANT PROFESSORS (PATT) Semyon Malamud Ph.D. in Mathematics (ETH Zurich, 2006) Loriano Mancini Ph.D. in Economics (University of Lugano, 2004) Anders Trolle Ph.D. in Finance (Copenhagen Business School, 2007)

10 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012

Moreover, in order to provide assistant correction. The mid-term review dossier professors with optimal support in their early covers the entire period at SFI@EPFL and professional development at SFI@EPFL, we have resembles the dossier that has to be prepared adopted the following “best practices”: for the promotion and tenure review (except that no outside letters are required for the • The Institute Director ensures that assistant mid-term review). The mid-term review is professors receive adequate resources conducted by the CDM Academic Promotion (e.g. for databases, travel, conferences, PhD Committee, which will, in case of weaknesses student salaries, administrative assistance). in the assistant professor’s record, offer • Assistant professors have reduced teaching comprehensive advice on how to improve and service loads. performance in order to meet EPFL’s • Assistant professors are actively encouraged promotion and tenure requirements. to attend (inter)national conferences and give poster and oral presentations (“become In addition to the “tenure track” path for as- visible”). sistant professors, SFI@EPFL also offers “tenure • The Institute Director organizes annual track” opportunities to successful senior resear- meetings with assistant professors. The main chers. Scientists interested in being promoted to purpose of these meetings is to evaluate their a permanent position as senior researcher also progress during the past year and help them have to undergo an academic review (for which develop a strategy for achieving their career the guidelines and criteria are also clearly de- goals (e.g. steps needed to establish interna- fined and available on the Internet), although the tional reputation in their field of research). requirements for promotion are somewhat less • The CDM Academic Promotion Committee demanding then for assistant professors. reviews the annual progress reports of the assistant professors and provides written Being a young institute, SFI@EPFL has so far feedback including advice for successful witnessed only one promotion (Rüdiger Fahlen- promotion and tenure. brach to associate professor in spring 2012). It • Assistant professors undergo a comprehensive is expected that Claudia Ravanelli will submit a mid-term review in their fourth year (near the dossier for promotion to senior researcher with mid-point of their tenure-track period), which permanent position in 2013. Our three tenure provides an early assessment of the likelihood track assistant professors will have to initiate of successful promotion and helps identify their promotion and tenure review at the end of weaknesses before it is too late for their 6th year at the latest (summer 2015).

AREAS 5 . OF COMPETENCE SFI@EPFL covers the following major subfields of As of today, asset pricing, corporate finance financial research (in alphabetical order): and financial engineering are particularly strongly represented in our group. Venturing into new • Asset Pricing and Management areas and research methods would allow us to • Corporate Finance offer additional courses (e.g. at Bachelor level), • Corporate Governance increase our collaboration with other EPFL • Entrepreneurial Finance groups and gain even more visibility within our • International Finance professional community. • Mathematical Finance • Quantitative Risk Management

SELF-EVALUATION REPORT 11 INTEGRATION INTO THE SWISS 6. FINANCE INSTITUTE NETWORK

SFI@EPFL forms part of the nationwide Swiss The Swiss Finance Institute is supported by Finance Institute network. The Swiss Finance the Swiss banking and finance community, the Institute is a private foundation that was es- Swiss stock exchange, the Swiss Confederation, tablished in 2006 at the initiative of the Swiss the Swiss National Science Foundation (SNSF) Bankers Association. and several Swiss universities.

In pursuit of its mission to achieve excellence The following SFI@EPFL professors have been in banking and finance education and research, elected as faculty members of the Swiss Finance the Swiss Finance Institute supports faculty Institute at the rank of Senior and Junior Chair: positions, research activities, a PhD program in finance and selected executive programs at part- • Senior Chair: Peter Bossaerts, Pierre ner universities at three regional centers: the Collin-Dufresne, Rüdiger Fahlenbrach, Swiss Finance Institute-Léman (EPFL, University Damir Filipovic, Julien Hugonnier, of Geneva, University of Lausanne), the Swiss Fi- Erwan Morellec nance Institute-Zurich (ETHZ, University of Zurich) • Junior Chair: Semyon Malamud, and the Swiss Finance Institute-Lugano (Univer- Loriano Mancini, Anders Trolle sity of Lugano) (see Figure 5). The Léman-Center is directed by Erwan Morellec.

Figure 5: The three regional centers of the Swiss Finance Institute: Swiss Finance Institute-Léman (EPFL, University of Geneva, University of Lausanne), Swiss Finance Institute-Zurich (ETHZ, University of Zurich) and Swiss Finance Institute-Lugano (University of Lugano).

SWISS FINANCE SWISS FINANCE INSTITUTE-LÉMAN INSTITUTE-ZURICH

UNIVERSITY UNIVERSITY EPFL ETHZ GENEVA ZURICH

UNIL UNIVERSITY LUGANO

SWISS FINANCE INSTITUTE LUGANO

THE SWISS FINANCE INSTITUTE NETWORK

12 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Being a partner of this network offers several • Knowledge transfer: The Swiss Finance Insti- key benefits to SFI@EPFL and its researchers: tute regularly organizes outreach events (e.g. breakfast seminars, business luncheons and • Interesting collaboration opportunities: The conferences) and circulates press releases to Swiss Finance Institute connects scientists actively promote the information flow between with shared interests and knowledge and academia, financial institutions and the public. fosters a collaborative spirit among its faculty • Comprehensive financial support: members. It applies the highest academic - In the context of the Swiss Finance Institute standards for the acceptance of professors as PhD Program for the Léman Area: scholar- Swiss Finance Institute faculty members and ships for first-year PhD students, funds thereby ensures high quality research and an for inviting lecturers, and funds enabling inspiring scientific environment within its PhD students to participate in academic community. conferences or conduct research during a • International competitiveness on the faculty certain period of time at another university. job market: By providing salary supplements - Salaries of three tenure track assistant pro- to professors holding a “Senior Chair” or fessors (Loriano Mancini, Semyon Malamud, “Junior Chair”, the Swiss Finance Institute Anders Trolle) over a period of three years, contributes significantly to the international extendable up to a maximum of eight years. competitiveness of its partner universities in - Funds to purchase databases. faculty recruitment. - Co-funding of research projects • Top-ranked PhD program: The Swiss Finance (e.g. the NCCR Finrisk). Institute offers a unique, nationwide PhD - Co-funding of research seminars. program in finance providing an intellectual - Co-funding of conferences environment and a curriculum comparable to (e.g. the Swissquote conference). the top PhD programs in Europe and North - Management and administration of the America. The program is available at the three Swiss Finance Institute Research Paper Swiss Finance Institute Centers - Léman, Series on the Financial Economics Network Zurich and Lugano. Since its inception, the (FEN) of the Social Science Research nationwide PhD Program has been directed by Network (SSRN). Erwan Morellec.

SELF-EVALUATION REPORT 13 MAJOR 7 . COLLABORATIONS

SFI@EPFL actively fosters national and interna- While both institutes are administratively tional networks and all SFI@EPFL faculty mem- independent, they enjoy research collaboration bers are involved in various collaborations with in multiple activities such as joint research pro- research colleagues from renowned universities jects, the organization of seminars on subjects of around the world. In addition to these individual common interest, such as the Finance Research partnerships and the collaboration between SFI@ Seminars and the Brown Bag Seminars and joint EPFL and the Swiss Finance Institute as well as publications (see Table 1 and Annex 1 and 2, its affiliated partner universities, we would also pages 39-40). Most recently, they initiated the like to highlight the following networks: SFI@EPFL-UNIL joint reading group addres- sing topics in “macroeconomics with financial frictions”. 7.1 University Finance Centre of Lausanne (CULF) In addition, CULF members coordinate their teaching and recruitment strategy (e.g. SFI@EPFL CULF is a joint initiative of EPFL and UNIL de- faculty members serve on the committees of their signed to pool their human resources in finance UNIL CULF colleagues and vice versa) in order and economics by bringing together SFI@EPFL to obtain synergies and avoid the duplication of and the UNIL Institute of Banking and Finance efforts. in one building2, thus creating opportunities for various interactions. 2 The EXTRANEF building on the UNIL campus.

Table 1: Selected examples of joint activities between researchers from SFI@EPFL and UNIL

Finance Research Seminars

SFI@EPFL and the University of Lausanne organize joint research seminars in finance. The seminars attract speakers from academic institutions around the world and cover a variety of topics of interest to both academics and research-oriented professionals. The seminars take place at EXTRANEF. Please see Annex 1 (page 39) for the seminar schedule 2012 - 2013.

Brown Bag Seminars

The SFI@EPFL Brown Bag Seminars provide a platform for internal faculty and students, as well as for faculty members from other institutes and visiting scholars to present their research. Within this seminar series, a few slots are reserved for internal SFI@EPFL-UNIL Brown Bags sessions, where faculty members from SFI@EPFL and UNIL discuss early-stage research projects and ideas in a workshop-like setting. Please see Annex 2 (page 40) for an overview of the most recent seminars.

14 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Co-publications

• Financing Investment: The Choice Between Public and Private Debt, E. Morellec, P. Valta, and A. Zhdanov (UNIL), Working Paper, November 2012. • Corporate Governance and Capital Structure Dynamics, E. Morellec, B. Nikolov, and N. Schürhoff (UNIL), Journal of Finance, vol. 67, pp. 803-848, 2012. • Health and (Other) Asset Holdings. J. Hugonnier, P. St-Amour (UNIL), and F.Pelgrin (UNIL), Review of Economic Studies, forthcoming. • Corporate Investment and Financing under Asymmetric Information, E. Morellec and N. Schürhoff (UNIL), Journal of Financial Economics, vol. 99, pp. 262–288, 2011. • Dynamic Investment and Financing under Personal Taxation, E. Morellec and N. Schürhoff (UNIL), Review of Financial Studies, vol. 23(1), pp. 101-146, 2010. • Financing and takeovers, E. Morellec and A. Zhdanov (UNIL), Journal of Financial Economics, vol. 87, pp. 556-581, 2008.

Co-supervision of PhD students

• Cornelius Schmidt, current PhD student at UNIL. Thesis directors: Rüdiger Fahlenbrach & Norman Schürhoff (UNIL) • Nataliy Guseva, PhD in 2011 from UNIL. Thesis directors: Erwan Morellec & Norman Schürhoff (UNIL) • Maria Cecilia Bustamante, PhD in 2009 from UNIL. Thesis directors: Erwan Morellec & Jean-Pierre Danthine (UNIL) • Boris Nikolov, PhD in 2008 from UNIL. Thesis directors: Erwan Morellec & Norman Schürhoff (UNIL)

Co-teaching

The EDFI doctoral program course “Empirical Corporate Finance” (EDFI) is taught by Rüdiger Fahlenbrach and Norman Schürhoff (UNIL).

Joint reading group “Macroeconomics with Financial Frictions”

Informal forum for faculty and doctoral students from SFI@EPFL and UNIL to present and discuss the latest research articles on interactions of the real sector of the economy with the financial sector and possible policy implications.

Joint research activities

• “Insurance Solvency Testing” (work in progress) D. Filipovic, H. Albrecher (UNIL) & V. Lautscham (UNIL) • “Competition, Credit Supply, and Debt Structure” (work in progress) E. Morellec, A. Zhdanov (UNIL) & P. Valta (HEC Paris) • “Corporate Governance Around the World: Evidence from a Structural Estimation” (work in progress) E. Morellec, N. Schürhoff (UNIL) & B. Nikolov (University of Rochester) • “Dynamic Corporate Finance: Theory and Tests” (NCCR FINRISK, 2009-2013) E. Morellec, T. Dimopoulos (UNIL), N. Schürhoff (UNIL) & A. Zhdanov (UNIL)

SELF-EVALUATION REPORT 15 7.2 Collaboration EPFL Seminar in Macroeconomics, throughout in macroeconomics the academic year. Speakers include renowned academic economists and promising young Luisa Lambertini has established close and researchers working on international economics fruitful working relationships with the UNIL and macroeconomic issues from all over the Department of Economics (DEEP) (Département world (see Table 2). These seminars are open d’économie et économie politique). Since Sep- to the public, although they are usually mainly tember 2007, the two units jointly organize an attended by faculty members and students. advanced research seminar series, the DEEP-

Table 2: Recently organized DEEP-EPFL seminars in macroeconomics

19.12.2012 Prudential Policy for Peggers Martin URIBE, Columbia University, New York, USA

11.10.2012 The Share of Systematic Variation in Bilateral Exchange Rates Adrien VERDELHAN, MIT Sloan School of Management, Cambridge, USA

03.10.2012 House Price Booms, Current Account Deficits, and Low Interest Rates Andrea FERRERO, Federal Reserve Bank of New York, USA

19.09.2012 Collateral Constraints and Macroeconomic Asymmetries Matteo IACOVIELLO, Federal Reserve Board, Washington, USA

23.05.2012 Fiscal Devaluations Gita GOPINATH, Harvard University, USA

07.03.2012 Exorbitant Privilege and Exorbitant Duty Pierre-Olivier GOURINCHAS, University of California, Berkeley, USA

14.12.2011 The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy Annette VISSING-JORGENSEN, Kellogg School of Management, Northwestern University, Evanston, USA

08.12.2012 Large Shocks in Menu Cost Models Peter KARADI, New York University, USA

04.04.2011 Inequality, Leverage and Crises Romain RANCIÈRE, Paris School of Economics, France

22.12.2010 Financial Business Cycles Matteo IACOVIELLO, Federal Reserve Board, Washington, USA

08.12.2010 Credit constraints and growth in a global economy Nicolas COEURDACIER, London Business School, UK

16 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 In addition, Luisa Lambertini and DEEP as from the universities of Geneva, Lausanne, also jointly coordinate the Macro Workshop Lugano, St. Gallen and Zurich (see Figure 6). for PhD students, a brown bag seminar series offering graduate and post-doctoral students an Participation in such a nationwide network opportunity to present ongoing work. Occasionally provides a unique opportunity for collaboration presentations are also given by visitors or local and the exchange of ideas. Apart from promoting faculty. cutting-edge research and doctoral education in finance, the NCCR FINRISK places great emphasis on fostering strategic partnerships between 7.3 NCCR FINRISK its researchers and the private financial sector. For this purpose, it organizes several outreach SFI@EPFL is deeply involved in the NCCR activities each year, which stimulate the dialogue FINRISK large-scale research network, which between scientists and practitioners.3 was initiated by the SNSF in 2001. This prestigious project was designed to increase knowledge creation in the field of financial valuation and risk management and includes more than forty professors of finance from EPFL and ETHZ as well 3 http://www.nccr-finrisk.uzh.ch/conferences.php

Figure 6: SFI@EPFL faculty members are heavily represented in the NCCR FINRISK network.

MODULE A - ASSET PRICING AND PORTFOLIO MANAGEMENT MODULE C - RISK MANAGEMENT COORDINATOR: F. TROJANI (University Lugano) COORDINATOR: LORIANO MANCINI (SFI@EPFL)

PROJECT A1: Behavioural Finance. PROJECT C1: Credit Risk and Non-standard LEADER: T. HENS (University Zurich) Sources of Risk in Finance LEADER: R. GIBSON BRANDON (University Geneva)

PROJECT A2: Macro Risk, Capital Flows and PROJECT C2: Volatility and Stability in Financial Markets Asset Pricing in International Finance LEADER: G. BARONE-ADESI (University Lugano) LEADER: P. BACCHETTA (University Lausanne)

PROJECT A3: New Methods in Theoretical and Empirical Asset Pricing LEADER: F. TROJANI (University Lugano) MODULE D - QUANTITATIVE METHODS IN FINANCE COORDINATOR: O. SCAILLET (University Geneva)

PROJECT A4: Dynamic Asset Pricing. LEADER: DAMIR FILIPOVIC (SFI@EPFL) PROJECT D1: Mathematical Methods in Financial Risk Management LEADER: M. SCHWEIZER (ETHZ)

PROJECT D2: Financial Econometrics for Risk Management LEADER: O. SCAILLET (University Geneva)

PROJECT D3: Computational Financial Economics MODULE B - CORPORATE FINANCE LEADER: FELIX KÜBLER (University Zurich) COORDINATOR: RÜDIGER FAHLENBRACH (SFI@EPFL)

PROJECT B1: Corporate Finance, Market Structure MODULE E - BANKING AND REGULATION and the Theory of the Firm COORDINATOR: J.C. ROCHET (University Zurich) LEADER: M. HABIB (University Zurich)

Project B2: Dynamic Corporate Finance: PROJECT E1: Systemic Risk and Dynamic Contract Theory. Theory and Tests LEADER: J.C. ROCHET (University Zurich) LEADER: ERWAN MORELLEC (SFI@EPFL)

SELF-EVALUATION REPORT 17 7.4 Collaboration with 7.5 Swissquote Princeton University Since 2010, Swissquote sponsors the “Swiss Last year saw the inaugural event of the Prin- quote Chair in Quantitative Finance“ which is ceton-Lausanne workshop series on quantitative held by Damir Filipovic. Through this Chair, finance, held in Lausanne. It brought together Swissquote and SFI@EPFL, but particularly Damir around 25 participants from the CULF network Filipovic, have established a fruitful cooperation (researchers from SFI@EPFL and UNIL) and eight in research topics of mutual interest which cul- researchers from Princeton University with the minates in the Swissquote conference organized specific objective of fostering interactions be- annually on the EPFL campus (see paragraph 13: tween these institutions. The workshop offered Outreach, page 37). an ideal platform for lively discussions about the latest developments in quantitative finance, such as carbon dioxide emission trading schemes, optimal security design for insurance risk, asset pricing puzzles, information percolation in social networks, volatility and interest rate risk trading. SFI@EPFL’s junior scientists and PhD students were particularly encouraged to present their research and very much appreciated the opportunity to establish contacts with researchers from Princeton. We intend to continue the Princeton- Lausanne workshop series on a rotating two-year cycle, once in Lausanne, once in Princeton.

18 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 ORGANIZATION 8 . AND MANPOWER

SFI@EPFL is currently composed of nine faculty Moreover, PhD students are admitted by the members, one senior researcher, five post-doc- group as a whole (and not hired by individual toral students and 18 PhD students. The academic professors) and enjoy co-supervision by several body is complemented by a small group of staff faculty members. members providing administrative and technical assistance to the researchers (see Table 3). Part Resource pooling has several advantages: of the administrative staff is shared with MTEI. • Co-supervision of PhD students by several Unlike most of the other EPFL departments professors stimulates academic interactions where professors have their specific budget within the team and provides the best possible and supervise mainly their own PhD students, learning environment for students. SFI@EPFL has adopted the concept of “resource • Pooling administrative staff furthers the pooling” which is common in traditionally or- efficient and effective deployment of ganized Finance Departments at top U.S. personnel resources and their experience. universities. This implies that administrative Indeed, numbers show that SFI@EPFL has personnel are shared and the major part of the a very cost-effective structure and gets Institute’s budget (e.g. salaries for administrative its administrative work done with very few staff and PhD students, costs for seminars and administrative staff members (2.65 EFT invited professors, databases, costs related to administrative staff / 37.95 EFT total staff). conference participation of students, IT equipment • The pooling of budgetary resources is and software, teaching) is administered centrally. an efficient way to achieve flexibility and transparency in the utilization of funds and optimize expenditures.

Table 3: SFI@EPFL staff summary (reference date: 2012)

Whereof Staff Total Whereof Full-time financed with category number women equivalents external funds Full professors 4 1 4 1 Associate professors 2 - 2 - Tenure track assistant 3 - 3 3 professors Senior scientists 1 1 1 - Communication 1 1 0.8 - Postdoctoral students 5 2 5 3 PhD students 18 3 18 9 IT support4 3 1.5 - Administrative support Administrator4 1 1 0.35 - Secretaries 3 3 1.5 - Section4 2 2 0.8 - TOTAL 43 14 37.95 16

4 Staff shared with MTEI.

SELF-EVALUATION REPORT 19 SFI@EPFL has a flat and participative organi- mented by EPFL efforts to provide sufficient day- zational structure, which furthers direct commu- care facilities on the campus and organize activi- nication and the flow of information between all ties for children during school vacations. individuals. This “culture of open dialogue“ and the small group size are conducive to informal While such measures have doubtlessly helped and frank discussions where issues can usually fill SFI@EPFL’s management positions with be resolved in a very efficient way. Twice a year, female candidates (all three positions are actually special events are organized for all faculty and occupied by women5), the proportion of women staff members that provide important opportu- holding senior academic positions at SFI@EPFL nities to interact socially and strengthen team remains very small (1 Full Professor6, 1 Senior spirit. Similarly, dinners are organized for the Researcher7). Hiring female professors has so far whole group to welcome new faculty members to proved extremely difficult due to the lack of quali- the team. Overall, the working ambiance at SFI@ fied candidates. EPFL can be considered very good which may partly explain the very low staff turnover (since An important obstacle to the recruitment the creation of SFI@EPFL in 2009, only two staff of female professors, which is not specific to members have had to be replaced). SFI@EPFL but a general problem, is the fact that women are often not interested in relocating because their husbands usually have their own 8.1 Promotion of gender equity career plans which they are reluctant to relin- quish. Dual career programs offered by EPFL SFI@EPFL seeks the input and participation may be helpful in overcoming these obstacles. of women in all activities and strives for gender balance in academic and management positions. 5 dr. Barbara Baumann (Administrator), Mrs. Carole Bonardi The Institute therefore offers flexible working (Head of Communication), Mrs. Françoise Jeannotat arrangements and, whenever possible, part-time (Deputy Head of Section). 6 Prof. Luisa Lambertini positions. These measures are perfectly comple- 7 dr. Claudia Ravanelli

20 SWISS FINANCE INSTITUTE – annual report 2012 BIBLIOMETRIC 9 . ANALYSIS

In all leading finance departments worldwide, top journals are: Journal of Finance, Journal of publishing consistently in the top journals in Financial Economics, Review of Financial Studies, finance and economics is critical to the success American Economic Review, Journal of Politi- of both faculty members and the department. cal Economy, Quarterly Journal of Economics, Many schools have formal requirements in terms Econometrica, and Review of Economic Studies. of number of top publications for promotions. At the London Business School for example, which One of the specifics of our department is that we consider together with the London School we not only do research in financial economics, of Economics and INSEAD as our primary com- but have members who focus on mathematical petitors in Europe, it is generally understood that finance. The list of top mathematical finance jour- individuals with fewer than four (full-length re- nals includes Mathematical Finance, Finance and fereed) publications in top journals are not eligible Stochastics, and Annals of Applied Probability. for tenure. A similar criterion is used by a number of American finance departments. The Swiss Members of our institute have had 35 publi- Finance Institute will not award a senior chair to cations (or articles accepted for publication) in researchers with fewer than four top publications. the above-mentioned top finance and economics journals and 12 publications in the top mathe- The list of leading journals in financial eco- matical finance journals (see Table 4) in the last nomics is uncontroversial. The finance and five years. This publication record in top journals economics journals that SFI@EPFL considers as sets us apart from other finance departments.

Table 4: Publications of SFI@EPFL faculty members in top finance and mathematical finance journals (2007 – 2012)

Annals of Applied Probability

• Affine Processes on Positive Semidefinite Matrices, C. Cuchiero, D. Filipovic, E. Mayerhofer, and J. Teichmann), Annals of Applied Probability, vol. 21(2), pp. 397-463, 2011.

Econometrica

• Endogenous Completeness of Diffusion Driven Equilibrium Markets, J. Hugonnier, S. Malamud, and E. Trubowitz, Econometrica, vol. 80(3), pp. 1249-1270, 2012. • Information Percolation with Equilibrium Search Dynamics, D. Duffie, S. Malamud and G. Manso, Econometrica, vol. 77(5), pp. 1513-1574, 2009. • Prices and Allocations in Financial Markets: Theory, Econometrics, and Experiments, P. Bossaerts, C. Plott, and W.R. Zame, Econometrica, vol. 75(4), pp. 993-1038, 2007.

Finance and Stochastics

• Optimal Capital and Risk Allocations for Law- and Cash-Invariant Convex Functions, D. Filipovic and G. Svindland, Finance and Stochastics, vol. 12(3), pp. 423-439, 2008. • Universal Bounds for Asset Prices in Heterogenous Economies, S. Malamud, Finance and Stochastics, vol. 12(3), pp. 411-422, 2008. • Long Run Forward Rates and Long Yields of Bonds and Options in Heterogenous Equilibria, S. Malamud, Finance and Stochastics, vol. 12(2), pp. 245-264, 2008. • Existence of Levy Term Structure Models, D. Filipovic and S. Tappe, Finance and Stochastics, vol. 12(1), pp. 83-115, 2008.

SELF-EVALUATION REPORT 21 Journal of Finance

• Liquidity in the Foreign Exchange Market: Measurement, Commonality, and Risk Premiums, L. Mancini, A. Ranaldo, and J. Wrampelmeyer, Journal of Finance, forthcoming. • On the Relative Pricing of Long Maturity Index Options and Collateralized Debt Obligations, P. Collin-Dufresne, R.S. Goldstein, and F. Yang, Journal of Finance, vol. 67(6), pp. 1983-2014, 2012. • This Time is the Same: Using Bank Performance in 1998 to Explain Bank Performance During the Recent Financial Crisis, R. Fahlenbrach, R. Prilmeier, and R.M. Stulz, Journal of Finance, vol. 67, pp. 2139-2185, 2012. • Corporate Governance and Capital Structure Dynamics, E. Morellec, B. Nikolov, and N. Schürhoff, Journal of Finance, vol. 67, pp. 803–848, 2012. • Exploring the Nature of Trading Intuition, A.J. Bruguier, S. Quartz, and P. Bossaerts, Journal of Finance, vol. 65(5), pp. 1703-1723, 2010. • Identification of Maximal Affine Term Structure Models, P. Collin-Dufresne, R.S. Goldstein, and C.S. Jones, Journal of Finance, vol. 63(2), pp. 743-795, 2008. • Stock Returns in Mergers and Acquisitions, D. Hackbarth and E. Morellec, Journal of Finance, vol. 63(3), pp. 1213-1252, 2008. • Portfolio Choice over the Life-Cycle when the Stock and Labor Markets Are Cointegrated, L. Benzoni, P. Collin-Dufresne, and R.S. Goldstein, Journal of Finance, vol. 62(5), pp. 2123-2167, 2007.

Journal of Financial Economics

• The term structure of interbank risk, D. Filipovic and A. B. Trolle, Journal of Financial Economics, forthcoming. • CEO Contract Design: How Do Strong Principals Do It? H. Cronqvist and R. Fahlenbrach, Journal of Financial Economics, forthcoming. • Optimal Incentives and Securitization of Defaultable Assets, S. Malamud, H. Rui, and A.B. Whinston, Journal of Financial Economics, forthcoming. • Explaining Asset Pricing Puzzles Associated with the 1987 Market Crash, L. Benzoni, P. Collin-Dufresne and R.S. Goldstein, Journal of Financial Economics, vol. 101(3), pp. 552-573, 2011. • Bank CEO Incentives and the Credit Crisis, R. Fahlenbrach and R.M. Stulz, Journal of Financial Economics, vol. 99(1), pp. 11-26, 2011. • Corporate Investment and Financing under Asymmetric Information, E. Morellec, and N. Schürhoff, Journal of Financial Economics, vol. 99 (2), pp. 262–288, 2011. • Price Impact and Portfolio Impact, J. Cvitanic and S. Malamud, Journal of Financial Economics, vol. 100(1), pp. 201-225, 2011. • Why do Firms Appoint CEOs as Outside Directors?, R. Fahlenbrach, A. Low, and R.M. Stulz, Journal of Financial Economics, vol. 97(1), pp. 12-32, 2010. • Can Interest Rate Volatility Be Extracted from the Cross Section of Bond Yields?, P. Collin-Dufresne, R.S. Goldstein, and C.S. Jones, Journal of Financial Economics, vol. 94(1), pp. 47-66, 2009. • Managerial Ownership Dynamics and Firm Value, R. Fahlenbrach and R.M. Stulz, Journal of Financial Economics, vol. 92(3), pp. 342-361, 2009. • Financing and Takeovers, E. Morellec and A. Zhdanov, Journal of Financial Economics, vol. 87, pp. 556-581, 2008. • Market Price of Risk Specifications for Affine Models: Theory and Evidence, P. Cheridito, D. Filipovic and R.L. Kimmel, Journal of Financial Economics, vol. 83(1), pp. 123-170, 2007. • Heterogenous Preferences and Equilibrium Trading Volume. T. Berrada, J. Hugonnier, and M. Rindisbacher, Journal of Financial Economics, vol. 83(3), pp. 719–750, 2007.

22 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Mathematical Finance

• The Canonical Model Space for Law-Invariant Convex Risk Measures is L¹, D. Filipovic and G. Svindland, Mathematical Finance, vol. 22(3), pp. 585-589, 2012. • Dynamic CDO Term Structure Modelling, D. Filipovic, L. Overbeck, and T. Schmidt, Mathematical Finance, vol. 21(1), pp. 53-71, 2011. • Mutual Fund Portfolio Choice in the Presence of Dynamic Flows, J. Hugonnier and R. Kaniel, Mathematical Finance, 20(2), pp. 187–227, 2010. • A Note on the Dai-Singleton Canonical Representation of Affine Term Structure Models, P. Cheridito, D. Filipovic, and R.L. Kimmel, Mathematical Finance, vol. 20(3), pp. 509-519, 2010. • Consistent Market Extensions under the Benchmark Approach, D. Filipovic and E. Platen, Mathematical Finance, vol. 19(1), pp. 41-52, 2009. • Optimal Numeraires for Risk Measures, Mathematical Finance, D. Filipovic, vol. 18(2), pp. 333-336, 2008. • Optimal capital and risk transfers for group diversification, D. Filipovic and M. Kupper, Mathematical Finance, vol. 18(1), pp. 55-76, 2008.

Review of Economic Studies

• Health and (Other) Assets Holdings, J. Hugonnier, F. Pelgrin, and P. Saint Amour, Review of Economic Studies, forthcoming.

Review of Financial Studies

• Institutional Investors and Mutual Fund Governance: Evidence from Retail – Institutional Fund Twins, R.B. Evans and R. Fahlenbrach, Review of Financial Studies, vol. 25, pp. 3530-3571, 2012. • Former CEO Directors: Lingering CEOs or Valuable Resources?, R. Fahlenbrach, B.A. Minton, and C.H. Pan, Review of Financial Studies, vol. 24(10), pp. 3486-3518, 2011. • Dynamic Investment and Financing under Personal Taxation, E. Morellec and N. Schürhoff, Review of Financial Studies, vol. 23(1), pp. 101-146, 2010. • Ambiguity in Asset Markets: Theory and Experiment, P. Bossaerts, P. Ghirardato, S. Guarnaschelli, and W. Zame, Review of Financial Studies, vol. 23(4), pp. 1325-1359, 2010. • Equilibrium Asset Pricing Under Heterogeneous Information, B. Biais, P. Bossaerts, and C. Spatt, Review of Financial Studies, vol. 23(4), pp. 1503-1543, 2010. • On the Relation Between the Credit Spread Puzzle and the Equity Premium Puzzle, L. Chen, P. Collin-Dufresne, and R.S. Goldstein, Review of Financial Studies, vol. 22(9), pp. 3367-3409, 2009. • Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives, A.B. Trolle and E.S. Schwartz, Review of Financial Studies, vol. 22(11), pp. 4423-4461, 2009. • Large Shareholders and Corporate Policies, H. Cronqvist and R. Fahlenbrach, Review of Financial Studies, vol. 22(10), pp. 3941-3976, 2009. • A General Stochastic Volatility Model for the Pricing of Interest Rate Derivatives, A.B. Trolle and E.S. Schwartz, Review of Financial Studies, vol. 22(5), pp. 2007-2057, 2009. • A GARCH Option Pricing Model with Filtered Historical Simulation, G. Barone-Adesi, R.F. Engle and L. Mancini, Review of Financial Studies, vol. 21(3), pp. 1223-1258, 2008.

SELF-EVALUATION REPORT 23 In Switzerland and most finance departments in Journal of Financial and Quantitative Analysis, Europe (see Figures 7, 8, and 9). Historically, Review of Finance, SIAM Journal on Financial finance researchers in Europe concentrated on Mathematics, Insurance: Mathematics and Eco- national and field journals, publishing more in nomics, and Stochastic Processes and their less visible journals. To remain internationally vi- Applications. A full list of all publications of sible, we attach a lot of importance to top journals. members of our institute during the period 2007 to 2012 is given in Part B of this report. Our faculty members have also published in other high quality journals such as the Journal of Economic Theory, Journal of Econometrics,

Figure 7: Publication output of SFI@EPFL faculty members from 2007 to 2012.

20 18 17 15 12 10 8 7 7 7 4

2007 2008 2009 2010 2011 2012

Number of peer reviewed publications per year Number of top publications in finance, economics and mathematical finance per year

24 SWISS FINANCE INSTITUTE – annual report 2012 Figure 8: Research output of SFI@EPFL (9.2 FTE), the Institute of Finance at the University of Lugano (9 FTE), the Department of Banking and Finance at the University of Zurich (16 FTE), the Finance Group at the London Business School (21 FTE), the Financial Markets Group at the London School of Economics and Political Science (34 FTE) and the Finance Group at INSEAD (19 FTE) in finance and economics. The overview includes publications in the following journals: Journal of Finance, Journal of Financial Economics, Review of Financial Studies, American Economic Review, Journal of Political Economy, Quarterly Journal of Economics, Econometrica, and Review of Economic Studies. FTE stands for full time equivalent.

1.2

0.8

0.6

0.4

FACULTY AND YEAR FACULTY 0.2

AND ECONOMICS PER FTE 0

TOP PUBLICATIONS IN FINANCE PUBLICATIONS TOP 2008 2009 2010 2011 2012 SFI@EPFL 0.43 0.76 0.54 0.65 0.65 Institute of Finance, University of Lugano (USI) 0.22 0.44 0.44 0.22 0.44 Department of Banking and Finance, 0.06 0.06 0.06 0.25 0.06 University of Zurich (UZH) Finance Group, London Business School (LBS) 0.43 0.24 0.57 0.29 0.67 Financial Markets Group, London School of 0.18 0.27 0.18 0.30 0.41 Economics and Political Science (LSE) Finance Group, INSEAD 0.21 0.53 0.32 0.16 0.16

Figure 9: Research output of SFI@EPFL (9.2 FTE), the Institute of Finance at the University of Lugano (9 FTE), the Department of Banking and Finance at the University of Zurich (16 FTE), the Finance Group at the London Business School (21 FTE), the Financial Markets Group at the London School of Economics and Political Science (34 FTE) and the Finance Group at INSEAD (19 FTE) in finance, economics and mathematical finance. In addition to the journals mentioned in the caption for Figure 8, this overview includes also the following top journals in mathematical finance: Mathematical Finance, Finance and Stochastics, and Annals of Applied Probability. FTE stands for full time equivalent.

1.2

0.8

0.6

0.4

ECONOMICS AND 0.2 MATHEMATICAL FINANCE MATHEMATICAL PER FTE FACULTY AND YEAR PER FTE FACULTY 0 TOP PUBLICATIONS IN FINANCE, PUBLICATIONS TOP 2008 2009 2010 2011 2012 SFI@EPFL 1.09 0.87 0.76 0.76 0.76 Institute of Finance, University of Lugano (USI) 0.22 0.44 0.44 0.22 0.44 Department of Banking and Finance, 0.06 0.06 0.06 0.25 0.19 University of Zurich (UZH) Finance Group, London Business School (LBS) 0.43 0.24 0.57 0.29 0.67 Financial Markets Group, London School of 0.18 0.27 0.18 0.30 0.41 Economics and Political Science (LSE) Finance Group, INSEAD 0.21 0.53 0.32 0.16 0.16

SELF-EVALUATION REPORT 25 MASTER PROGRAM 10 . IN FINANCIAL ENGINEERING

SFI@EPFL offers a highly selective two-year mathematical finance, mathematics, statistics, Master program in Financial Engineering (MFE) operations research (see Table 5). The program comprising a total of 120 ECTS credits9. The is broad yet specific, with an extensive range of study program includes three semesters of electives to enable students to tailor their studies intensive coursework followed by a mandatory to their individual needs. six-month internship with Master thesis in the finance industry (see Figure 11). The curriculum Overall, MFE students learn how to combine is entirely in English. modern finance theory and computational methods with a practical knowledge of the real busi- Figure 11: MFE program structure ness world in which they can employ these skills. They will thus have the perfect profile to rapidly integrate into banks, investment and hedge SEMESTER M1: SEMESTER M2: CORE COURSES ADVANCED COURSES funds, re-insurance companies, financial software firms, consulting and auditing firms or to pursue an academic career in a top international

SEMESTER M3: SEMESTER M4: PhD program in finance or financial engineering. ADVANCED COURSES INDUSTRY INTERNSHIP & ELECTIVES AND MASTER THESIS 10.1 Study program MFE is the result of a multi-disciplinary effort involving faculty members with a variety During the first semester all MFE students of disciplinary backgrounds, e.g. asset pricing, participate in several compulsory foundation computer science, corporate finance, economics, courses that provide them with in-depth knowledge

Table 5: MFE faculty members (academic year 2012 – 13)

From SFI@EPFL Pierre Collin-Dufresne Professor of Finance Rüdiger Fahlenbrach Professor of Finance Damir Filipovic Professor of Quantitative Finance Julien Hugonnier Professor of Finance Luisa Lambertini Professor of International Finance Semyon Malamud Professor of Finance Loriano Mancini Professor of Finance Claudia Ravanelli Senior Researcher in Finance Anders Trolle Professor of Finance

From EPFL Michel Bierlaire Professor of Operations Research, ENAC Anthony Davison Professor of Statistics, SB Boi Faltings Professor of Computer Science, IC

From outside EPFL Marc-Olivier Boldi Professor of Statistics and Service Operation Management, HEL Laurent Gauthier Director, Structured Products Experts, Paris Lorenz Goette Professor of Economics, UNIL Eric Jondeau Professor of Finance, UNIL Alain Siegrist Financial Director Philip Valta Professor of Finance, HEC Paris

9 ECTS: European Credit Transfer and Accumulation System

26 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Figure 12: MFE curriculum for the academic year 2012-13 (courses in white boxes are mandatory, courses in grey boxes are electives)

1ST SEMESTER - FOUNDATION COURSES

INTRODUCTION STOCHASTIC QUANTITATIVE MACROFINANCE ECONOMETRICS TO FINANCE CALCULUS I METHODS (ECTS 6) (ECTS 6) (ECTS 6) (ECTS 4) IN FINANCE (ECTS 6) L. LAMBERTINI L. MANCINI R. FAHLENBRACH S. MALAMUD C. RAVANELLI

SOCIAL AND HUMAN SCIENCES (ECTS 3)

2ND SEMESTER - ADVANCED COURSES & ELECTIVES

FINANCIAL STOCHASTIC INVESTMENTS BEHAVIORAL FINANCE DERIVATIVES ECONOMETRICS CALCULUS II (ECTS 6) (ECTS 2) (ECTS 6) (ECTS 6) (ECTS 4) A. TROLLE L. GOETTE J. HUGONNIER E. JONDEAU D. FILIPOVIC

SOCIAL AND TIME SERIES QUANTITATIVE RISK HUMAN SCIENCES (ECTS 4) MANAGEMENT (ECTS 3) A. DAVISON (ECTS 4) VACAT

3RD SEMESTER - ADVANCED COURSES & ELECTIVES

ADVANCED TOPICS REAL OPTIONS ADVANCED FIXED INCOME VENTURE CAPITAL IN FINANCIAL & FINANCIAL DERIVATIVES ANALYSIS (ECTS 4) ECONOMETRICS STRUCTURING (ECTS 4) (ECTS 6) R. FAHLENBRACH (ECTS 4) L. MANCINI (ECTS 4) P. VALTA A. TROLLE D. FILIPOVIC

GLOBAL BUSINESS INTELLIGENT FINANCIAL SECURITIZATION & CREDIT RISK ENVIRONMENT AGENTS & MANAGERIAL THE FINANCIAL (ECTS 4) (ECTS 4) (ECTS 6) ACCOUNTING (ECTS 4) CRISIS (ECTS 2) P. COLLIN DUFRESNE L. LAMBERTINI B. FALTINGS A. SIEGRIST L. GAUTHIER

MATHEMATICAL COMPUTATIONAL MODELLING GAME THEORY OF BEHAVIOR (ECTS 4) & APPLICATIONS M. BIERLAIRE (ECTS 4) B. FALTINGS and understanding of subjects with which every tations where applicable), a midterm examination financial professional should be familiar (see and a final examination that is in some cases re- Figure 12). The core curriculum also lays a strong placed by an individual project. foundation for the advanced (which are also compulsory) and elective courses (where students In their fourth semester, MFE students spend are given a choice) taught in the second and third a period of 25 weeks as interns in the finance semesters. Depending on the number of stu- industry. During this time, students write their dents enrolled, the portfolio of electives may vary Master thesis project under the joint supervision slightly from year to year. Furthermore, subject of an internship supervisor from the host company to the approval of the MFE Section, students and an MFE faculty member acting as academic may also choose elective courses from the entire supervisor. The company in which students carry EPFL/UNIL Master program portfolio. out their internship and the subject of the Master project thesis must have been previously approved In line with EPFL teaching guidelines, MFE by MFE section members. Table 6 (page 28) courses consist of weekly lectures and hands-on gives some examples of recent master projects. exercises where students can put into practice A complete list of the companies concerned what they learned in the theoretical part of the and Master thesis projects completed since the course. Student performance is evaluated via inception of our Master program is provided in homework assignments (including class presen- Annex 3 (page 42) to this document.

SELF-EVALUATION REPORT 27 Table 6: Examples of industry internship projects by MFE students

Project title Company The changing nature of commodity returns Banque Cantonale Vaudoise, Lausanne Corporate valuation models Lazard Investment Bank, Paris for mergers and acquisitions Factor-based commodity trading strategies Lombard Odier, Geneva Valuation of convertible bond options Jabre Capital Partners, Geneva Predictable trading strategies create profit Four Elements Capital, Singapore opportunities for sophisticated investors in the commodity market

As a way of preparing our students for the job members from the Financial Engineering Section market, we strongly encourage them to find in- and the admissions decisions made in the section ternship places. Of course, we actively support are then discussed at school level to ensure con- them in this endeavor by giving them access to sistent admission procedure across disciplines. our professional contacts and also by helping with the preparation of a comprehensive candi- Immediately after its inception, the MFE pro- date dossier. Students have also access to the gram witnessed a rapid increase in candidates EPFL internships platform where companies post which, during the last three years, has stabilized internship offers: http://internships.epfl.ch/ at around 180 applications per year. MFE is highly selective and seeks only the best and brightest Since 2010-2011, MFE also offers a Minor students, which is why in the past we accepted in Financial Engineering to all EPFL master only around 30% of applications. Unfortunately, students regardless of their field of study. The the number of female enrolments remains small minor is designed to introduce students to the (around four per year), which is not untypical key concepts and tools of financial engineering however for a major with a strong technical fo- through a choice of courses worth 30 ECTS cus. In spite of its short lifetime, the MFE enjoys credits. In order to maintain limited class sizes significant international recognition and around that foster interactions between students and 70% of students who started in 2011 were from professors, the minor program is restricted to ten foreign universities. For detailed admission participants per academic year. statistics, see Figures 13 - 17.

10.2 Student admission procedures 10.3 Program structure And statistics The MFE program is directed by Julien Hugonnier. MFE has two admission rounds with application He is assisted by a group of part-time staff mem- deadlines on January 15 and April 15 respectively, bers, responsible for the daily office administra- though admissions are only accepted for the be- tion of MFE and the oversight and management ginning of a new academic year (mid- Septem- of the internship program10. Two committees, the ber). The idea of the two admission rounds is to Steering Committee and the Teaching Committee, give foreign students the opportunity to apply as provide advice and guidance. early as possible to give them sufficient time for the completion of visa procedures. The main criteria used in the selection process are the students’ background and qualifications, and their 10 letters of recommendation and motivation. Each Mrs. Carole Bonardi (Internship Manager), Mrs. Françoise jeannotat (Deputy Head of Section), Mrs. Emanuela Mancianti application is reviewed by at least two faculty (Secretary).

28 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Figure 13: MFE student applications, admissions and enrollment numbers for the academic year 2008-09 through 2012-13.

200 187 180 177 157 150

100 55 45 45 55 54 50 25 26 28 14 16 21 0 Applications Admissions Enrollment

AY 2008-09 AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13

Figure 14: Number of new entering exchange and Minor Figure 15: New entering students by gender. students. The Minor program is being offered since the academic year 2010-11. 10 22 22 17 5 5 5 13 10 3 6 2 2 4 3 4 4 0

AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13 AY 2008-09 AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13

Exchange students Minor students Male Female

Figure 16: Number of new entering MFE students with an EPFL background. Representation of“sections”over the period AY 2008-09 to AY 2011-12: Mathematics (5 students), Communication Science (4 students), Physics (3 students), Computer Science (2 students), Life Sciences & Technology (1 student), Mechanical Engineering (1 student), Microengineering (1 student). 26 28 21 14 16 9 6 2 3 0 AY 2008-09 AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13

Total number of MFE students Number of MFE students with EPFL Bachelor

Figure 17: Country where students completed their qualification before enrolling in MFE (data in this figure represent information reported during the academic year 2011-12).

3 1 1 1 1 1 1 4 China Netherlands France Romania Germany Russia Greece Switzerland Italy Thailand Mexico

5 7 1

SELF-EVALUATION REPORT 29 MFE Steering Committee to “apply the theory of martingales in the context Oversees the curriculum and quality of the MFE of mathematical finance“. teaching program. • Jacques Bourachot, Chief Operating Officer, In our opinion, this specialization is therefore Crédit Agricole Suisse SA not comparable with our Master program which • Paolo Buzzi, Chief Technology Officer, provides a complete range of finance courses Swissquote taking students from basic finance and economic • Paul Embrechts, Professor of Mathematics, concepts to the latest developments in all fields ETH Zurich of financial engineering including derivatives, • Christopher Finger, Head of Risk Research, credit risk, fixed income analysis, securitization RiskMetrics Group and high frequency data econometrics. It is im- • Helene Harasty, Head of Quantitative Asset portant to note that our aim is to teach students Management and Research, Lombard Odier not only the models but also the tools to analyze • Julien Hugonnier, MFE Director, SFI@EPFL and convey the assumptions behind them and the • Paolo Koch, Head of Group Risks & Analytics, risks associated with their use. Swiss Re • Olivier Ledoit, Department of Economics, We think that, while it could be appropriate University of Zurich as an introduction to mathematical finance for • Erwan Morellec, SFI@EPFL prospective PhD students, the Master specialization proposed by the Mathematics Section is not MFE Teaching Committee sufficient for students wishing to work in the fi- Assesses the implementation of study plans and nance industry, especially given the competition evaluations, proposes improvements and adjust- in today's job market and the challenges current- ments and advises on new trends and develop- ly faced by this industry. In our opinion, a better ments in teaching. way for Master students in mathematics to get • MFE Director: Julien Hugonnier acquainted with financial engineering would be • SFI@EPFL faculty members: for them to do a Minor in Financial Engineering. Rüdiger Fahlenbrach, Damir Filipovic, According to EPFL guidelines, they could replace Erwan Morellec, Anders Trolle 30 credits of their original Master curriculum with • MFE student representatives: 30 credits taken from a specific list of financial Hussein Nassereddine and Ali Beydoun, engineering courses (see Figure 18). Some of Yan Wang (2nd year) these courses are mandatory to ensure that these • PhD student representative: Julien Cujean students possess a certain basic knowledge in finance when they graduate.

10.4 MFE versus the Master Our section currently accepts ten Minor stu- SPecialization "Statistics and dents in each MFE class. To attract a higher financial mathematics" offered number of mathematics students, we are in con- By the Mathematics Section of the tact with the director of the Mathematics Section ePFL School of Basic Sciences in order to jointly develop a proposal for some specific series of Minor courses in financial engi- In 2008, the School of Basic Sciences launched neering that would integrate well into the Master a new specialization: "Statistics and financial curriculum of these students. mathematics" within their Master program in applied mathematics, which offers students the opportunity to take courses related to financial 10.5 Initiatives to recruit more EPFL mathematics. However, apart from a course in STudents for the MFE program stochastic calculus, and some courses in statistics, the curriculum includes only one finance-re- As shown in our admissions statistics (see Figure lated course, namely “Martingales and Financial 16, page 29), MFE recruits a large number of its Mathematics” (MATH-470), whose stated goal is students externally. This is unfortunate because

30 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 we believe, and our limited experience confirms • A number of articles were published in the this, that students with an EPFL Bachelor do very campus journal Flash. well both academically during studies and after • In addition to our efforts, the EPFL Finance graduation in terms of placement. Association (see http://tfa.epfl.ch/), created by MFE students in 2011, also organized finance- In order to attract more EPFL students we related activities on campus promoting the have tried over the last two years to promote the MFE master program. MFE program more effectively on the campus. More specifically, These measures have shown their first positive results with eleven applications from EPFL • We organized two information sessions in March students in 2011 (compared to only five in 2010) 2011 and March 2012 including a presentation and ten in 2012. We hope these numbers will fur- about the program and an informal Q&A ses- ther increase in the future. sion. Both events were successful, with around 40 registered participants at the first session The main difficulty we face in attracting appli- and 90 at the second one who came from cations from EPFL students is that these students almost all sections at EPFL. generally have only a very vague idea about what • We organized a public advertisement financial engineering actually is and are therefore campaign with flyers in the Lausanne-EPFL reluctant to forgo their primary field of studies to metro during the 2012 application period. join us. The development of introductory courses • We actively participated in all outreach events in economics and finance at Bachelor level could organized on campus including the EPFL be very helpful in this respect, as it would allow forum, the open days and the information days students to gain some understanding of the topic targeted at high school students potentially before making their application decisions. interested in attending EPFL.

Figure 18: Range of MFE courses open to Minor students.

1st SEMESTER

INTRODUCTION ECONOMETRICS (ECTS 6) TO FINANCE (ECTS 6) STOCHASTIC CALCULUS I (ECTS 4) no prerequisites no prerequisites no prerequisites

2nd SEMESTER

DERIVATIVES (ECTS 6) FINANCIAL ECONOMETRICS (6 ECTS) INVESTMENTS (ECTS 6) prerequisites: introduction to finance, prerequisites: introduction prerequisites: introduction econometrics, stochastic calculus I and II to finance, econometrics to finance (taken concurrently)

TIME SERIES QUANTITATIVE RISK MANAGEMENT STOCHASTIC CALCULUS II (ECTS 4) (ECTS 4) (ECTS 4) prerequisites: stochastic calculus I

3rd SEMESTER

ADVANCED TOPICS IN FINANCIAL ADVANCED DERIVATIVES (ECTS 4) FIXED INCOME ANALYSIS (ECTS 6) ECONOMETRICS (ECTS 4) prerequisites: stochastic prerequisites: introduction to finance, prerequisites: introduction to finance, calculus I and II, derivatives econometrics, stochastic derivatives, econometrics, investments investments

CREDIT RISK (ECTS 4) prerequisites: introduction to finance, econometrics, stochastic calculus I and II, derivatives, investments

SELF-EVALUATION REPORT 31 DOCTORAL PROGRAM 11 . IN FINANCE

The Doctoral Program in Finance at EPFL (EDFI) 3rd Quarter: is targeted towards the pursuit of academic • International finance (2 ECTS) excellence. It aims at providing an intellectual Ines Chaieb, Professor of Finance, University environment and a curriculum comparable to the Geneva (UNIGE) & Harald Hau, Professor of top PhD programs in Europe and North America. Finance and Economics, UNIGE It comprises two phases: a preparatory year of • Empirical corporate finance (2 ECTS) intensive coursework followed by three to four Rüdiger Fahlenbrach, Professor of Finance, years of advanced studies and research. The SFI@EPFL & and Norman Schürhoff, Professor course program covers a wide range of subjects of Finance, UNIL including asset pricing, corporate finance, ban- • Dynamic asset pricing (2 ECTS) king, mathematical finance and econometrics. Julien Hugonnier, Professor of Finance, SFI@EPFL

11.1 First phase: foundation courses Each core course is followed by an examination. The faculty member responsible attributes The EDFI program starts with a curriculum of the final grade for the course based on project courses (foundation courses) taught partly by assessments, class participation and graded in- local faculty members and partly by distinguished terim homework. visitors from high-ranking European and Ameri- can universities. The aim of this intensive course- Student admission to the second phase (thesis work is to provide all candidates with a broad and writing) is determined on the basis of the grades complete education covering the basic building obtained for the core courses as well as the suc- blocks and conceptual tools of finance. cessful completion of a summer research paper (Candidacy Exam). The summer paper should be During their first year, PhD students take the the first draft of a “publishable” research paper following courses: and should contain original theoretical or empirical work developed by students on their own 1st Quarter: (with minimal guidance by a supervisor). At the • Mathematics for financial economics (2 ECTS) Léman-Center, 50 to 60% of students are admit- Semyon Malamud, Professor of Finance, ted to the second phase of the PhD program. SFI@EPFL • Financial econometrics (2 ECTS) Eric Jondeau, Professor of Finance, UNIL 11.2 Second phase: PhD research • Game theory (2 ECTS) Thomas Mariotti, Professor of Finance and Upon admission to the second phase of the Economics, Toulouse School of Economics program, doctoral students select a thesis topic • Asset pricing (2 ECTS) and chose their thesis supervisor. In this second Pierre Collin-Dufresne, Professor of Finance, phase, all PhD students are required to follow SFI@EPFL the annual PhD workshop at the “Gerzensee Study Center”, the faculty’s research seminars 2nd Quarter: in finance, and the internal Brown Bag Lunch • Theoretical corporate finance (2 ECTS) Seminar. In addition, NCCR FINRISK project Erwan Morellec, Professor of Finance, partners offer a wide variety of specialized SFI@EPFL courses. The goal of these advanced courses is to • Financial institutions (2 ECTS) provide students with the opportunity to acquire Yuki Sato, Professor of Finance, UNIL the specialized skills that are most relevant to • Empirical asset pricing (2 ECTS) their thesis work. The selection of the appropriate Michael Rockinger, Professor of Finance, UNIL specialized courses will be made jointly by the student and their thesis supervisor.

32 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 The completion of the second phase entails a • Advanced doctoral grants successful final defense of the doctoral thesis. Swiss Finance Institute PhD students with academic ambitions are encouraged to spend an extended period abroad at a leading 11.3 Student support research institute under the pre-arranged supervision of a scholar interested in the Our doctoral students receive support via various student’s research. For this purpose, the Swiss means. Finance Institute has launched a Program of Advanced Doctoral Grants. PhD candidates • Scholarships for 1st year students interested in this program submit a funding PhD students receive scholarships of request to the SNSF and send a copy of their CHF 30’000.- from the Swiss Finance Institute request to the Swiss Finance Institute. If the during their first year as the course program SNSF will not support the student’s request, requires full-time commitment to studies and however, but the Swiss Finance Institute students are not permitted to work or receive ad-hoc committee deems it worthy, the Swiss any external funding during this period. Finance Institute will guarantee financial The Swiss Finance Institute budgets an support of CHF 40’000.-, allowing the student average of ten scholarships per year for to go ahead and plan the visit. the Léman-Center. • Conference reimbursement / travel budget SFI@EPFL encourages PhD students to ac- 11.4 Student placement record tively attend professional association meetings and covers the costs for doctoral students Since its inception, the Swiss Finance Institute presenting a paper at a conference approved PhD Program for the Léman Area has been very by the student’s thesis supervisor and successful at placing students in leading organi- the Head of the EDFI program. zations in academia and industry. • Workshop series In collaboration with other Swiss universities, Recent academic placements include: SFI@EPFL has launched a new workshop series to further enhance community building • Lukas M. Schmid, Assistant Professor of among Swiss PhD students in finance. These Finance, Duke University: The Fuqua School one-day workshops will take place once a year, of Business (2008) in September or February/March, alternately • Emilio Osambella, Assistant Professor of at one of the three Swiss Finance Institute Finance, Tepper School of Business, Centers - Léman, Zurich and Lugano. Each Carnegie Mellon University (2009) workshop is organized by local PhD students. • Boris Nikolov, Assistant Professor of Finance, • Academic job market support Simon School of Business, University of A workshop to prepare advanced PhD students Rochester (2009) for the academic job market is under develop- • Cecilia Bustamante, Assistant Professor of ment. The main idea of this workshop, which Finance, London School of Economics (2009) will be directed by Pierre Collin-Dufresne, • Philip Valta, Assistant Professor of Finance, Head of the EDFI program, is to provide com- HEC Paris (2010) prehensive information regarding the various • Rodolfo Prieto, Assistant Professor of Finance, aspects of applying for academic jobs in Boston University School of Management finance, conduct mock interviews (during (2010) the workshop and in local centers) with • Elise Payzan le Nestour, Assistant Professor of constructive feedback, and provide help with Finance, Australian School of Business (2010) preparing a successful application package. • Daniel Andrei, Assistant Professor of Finance, Anderson Graduate School of Management, University of California Los Angeles (2012).

SELF-EVALUATION REPORT 33 11.5 Program structure Collin-Dufresne who is assisted by a part-time secretary responsible for the daily office ad- The EDFI program is part of the Swiss Finance ministration11. A Program Committee provides Institute PhD program in finance, which is a cen- strategic advice and guidance. It is composed trally coordinated program directed by Erwan of Pierre Collin-Dufresne, Rüdiger Fahlenbrach, Morellec and operating on multiple campuses. Damir Filipovic, and Erwan Morellec. The EPFL based program is directed by Pierre

12. STRATEGIC PRIORITIES

SFI@EPFL has set itself the following goals in the tivities, we endeavor to offer as many courses as area of teaching and research: possible taught by SFI@EPFL faculty members.

A. Develop curriculum at Bachelor level In this context, there is a particular need for Offering courses in basic finance at the Bachelor faculty members with expertise to teach the fol- level, e.g. via offering elective modules within lowing courses: selected EPFL Bachelor programs, would have the dual advantage of improving the visibility of • Quantitative Risk Management SFI@EPFL on the campus as well as sparking an (MFE Master Program) early interest in financial research among EPFL Lecturer vacancy: Course formerly taught by students which, again, would hopefully lead to Valérie Chavez who moved to UNIL more of them enrolling in the SFI@EPFL Master • Design of Market-Based Solutions to program. Allocation Problems / Game Theory (MFE Master Program) The following courses would certainly be of Lecturer vacancy: Course formerly taught by great interest and benefit to a broad cross-section Peter Bossaerts who returned to Caltech of the student body and provide them with a fun- • Financial Econometrics damental understanding of financial markets and (MFE Master Program) the basic tools and skills needed to analyze and Course currently taught by Eric Jondeau understand the economic environments within (UNIL) which they will pursue their careers: • Game Theory (EDFI PhD Program) • Finance: e.g. evaluation of investment projects, Course currently taught by Thomas Mariotti technologies, patents and/or firms, the identi- (Toulouse School of Economics) fication and management of risks, etc. • Macro-finance: e.g. role of central banks and C. Expand research focus other financial institutions, exchange rates and Our research to date focuses mainly on asset pri- interest rates, role of money, etc. cing, corporate finance and financial engineering, • Microeconomics: e.g. game theory, industrial which can be explained by the fact that recent organization, intertemporal choices, etc. recruitments were mainly motivated by the need to staff the Master in Financial Engineering pro- B. Have more Master and PhD courses taught gram. We would now like to expand our research by in-house faculty in several areas that would allow SFI@EPFL to To ensure the consistently high quality of SFI@EPFL develop new, or strengthen existing, relations with Master and PhD programs, as well as coherence other EPFL researchers and other areas that are between the Institute’s teaching and research ac- markedly different from those already covered.

11Mrs. Valérie Maillard 34 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 13. OUTREACH

Our research responds to actual needs and SFI@EPFL website issues and we endeavor to disseminate new An important channel for reaching the widest knowledge and findings to practitioners and the public possible is the SFI@EPFL website, in public at large. To this end, SFI@EPFL is involved particular the sites “News” (http://actu.epfl.ch/ in different outreach activities with political and search/sfi) and “Events” (http://sfi.epfl.ch/events) economic impact : where we feature new research achievements, events and seminars as well as general informa- Public press articles tion about the institute, campus life and student As shown in Table 7, SFI@EPFL research and activities. events receive broad coverage in the international media.

Table 7: SFI@EPFL media coverage 2010 – 2012

Deat Media Country SFI @ EPFL Title of the article

20.12.2012 RSI Rete Uno CH L.Lambertini “Scandalo Libor. Multa record per UBS”

Swissquote 12.11.2012 L'Agefi CH “Mesures très hétérogènes” Conference Swissquote “La difficile redéfinition des risques 09.11.2012 L'Agefi CH Conference systémiques” Chaire “Universités et Sponsors, les liaisons 17.10.2012 Bilan CH Swissquote dangereuses”

24.09.2012 Financial Times USA L. Mancini “Carrying liquidity as far as you can”

“Gestion des risques dans les banques: 05.09.2012 Le Temps CH E. Morellec les leçons de la crise” “Foreign exchange market not liquid 03.09.2012 VoxEU UK L. Mancini you may think” “La Crise ne stoppe pas 21.06.2012 L'Hebdo CH MFE l'embauche de jeunes talents” “Private Gelder auch für Schweizer 03.06.2012 Sonntag CH Swissquote Hochschulen” Finanz D. Filipovic “Risk barometer of the interbank 28.03.2012 CH und Wirtschaft & A. Trolle market” “Les clients ne veulent plus avoir leur 14.03.2012 Bilan CH Swissquote argent camouflé dans un réduit alpin”

06.02.2012 L'Agefi CH MFE /Swissquote “R&D dans le e-private banking”

“Facebook founder's iron-grip IPO 03.02.2012 Slash Gear USA R. Fahlenbrach could sink or save site” “Should Facebook Investors Worry 02.02.2012 CNBC.com USA R. Fahlenbrach About Lack of Control?” “La crise a fait disparaître 26.01.2012 L'Hebdo CH P. Bossaerts les références de placements sans risque” A “bridge to somewhere”: Building a 24.10.2011 VOX UK L. Lambertini comprehensive strategy for resolving the Eurozone debt crisis

SELF-EVALUATION REPORT 35 “Event Swissquote: un système 21.10.2011 L'Agefi CH SFI@EPFL mathématique pour prédire l'avenir des marchés actions” P. Collin- “Crise financière: La bombe 13.10.2011 L'Hebdo CH Dufresne à retardement des CDS” “Financement: l'innovation 10.10.2011 L'Agefi CH SFI@EPFL favorisée en période de surchauffe” “Des chercheurs romands veulent 27.09.2011 Le Temps CH J. Hugonnier améliorer l'allocation d'actifs” Frankfurter 12.06.2011 Allgemeine D R. Fahlenbach “Die Banken lernen nicht” Sonntagszeitung “Les banques ne bénéficient 10.06.2011 L'Agefi CH R. Fahlenbach pas de l'expérience des crises” “L'utilisation des CoCos 06.05.2011 Le Temps CH E. Morellec offre des avantages majeurs” “Swissquote & EPFL day 21.04.2011 Lfm Radio CH SFI@EPFL on quantitative finance” “Leçons de profileurs 20.04.2011 L'Agefi CH SFI@EPFL d'investissements Premier Day” “L'enseignement de la finance 20.04.2011 Le Temps CH E. Morellec en pleine mutation”

29.03.2011 L'Agefi CH SFI@EPFL “Cycle de seminaires en finance”

02.02.2011 Bilan CH P. Bossaerts “les 20 suisses qui font l'innovation”

“Des PDG gros actionnaires n'ont pas 09.12.2010 L'Hebdo CH R. Fahlenbrach évité la faillite de leur banque”

17.11.2010 Bilan CH R. Fahlenbrach Deux chercheurs primés par le SFI

06.11.2010 Le Temps CH R. Fahlenbrach “Etudes suisses récompensées”

Swissquote “Danthine en faveur du maintien 29.10.2010 L'Agefi CH conference d'une politique accomodante” “Wall Street” suscite un buzz dans 09.10.2010 Tribune de Genève CH P. Bossaerts les rangs universitaires à Genève” “Prestigieux Master of science MSc 29.10.2010 Le Nouvelliste CH MFE en ingénierie financière” “Lausanne affirme sa place 01.09.2010 24 Heures CH CULF dans la formation financière” “Bank CEOs and the bewitching 14.07.2010 Wall Street Journal USA R. Fahlenbrach carrot” “Le Credit Suisse crée 250 emplois 09.07.2010 24 Heures CH MFE pour faire de l'informatique à l'EPFL” “Warum Millionengehälter 20.05.2010 Handelsblatt D R. Fahlenbrach übermütig machen”

36 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Events Swiss Finance Institute outreach initiatives Since the creation of the Swissquote Chair Moreover, SFI@EPFL is also actively involved in Quantitative Finance, once a year SFI@EPFL in outreach initiatives coordinated by the Swiss organizes the “Swissquote Conference” addres- Finance Institute such as the recently created sing “hot topics” in finance (see Table 8). These Knowledge Center aimed at promoting the flow conferences are well attended by numerous of information between academia and industry. participants representing various backgrounds In the context of this Center, Swiss Finance Ins- including academia, the finance industry, economy titute faculty members act as expert advisers to and media. practitioners and industry representatives. Other related activities include the creation of a data- Equally succesfull was the “Day on Quantitative base with topical articles and presentations given Finance - When Academics Meet Practitioners” at events, the organization of seminars and work- organized at EPFL on 19 April 2011. shops for practitioners and regular circulation of press releases.

Table 8: Swissquote conferences organized by the Swissquote Chair in Quantitative Finance and SFI@EPFL

Topic Venue Date Liquidity and Systemic Risk EPFL November 8th & 9th, 2012 Asset Management EPFL October 20th & 21st, 2011 Interest Rate and Credit Risk EPFL October, 28th & 29th, 2010

SELF-EVALUATION REPORT 37 14 . BUDGET

Since its inception, SFI@EPFL has had consi- In addition to attracting four sponsored derable success in attracting third party funding. chairs, SFI@EPFL has a very successful track In 2010 and 2011, external sources contributed record in fundraising through competing for 27% and 35% of the Institute’s overall budget (see grants. Current grants include support from Table 9). A level similar to that of 2011 is expected SNSF (individual projects, Sinergia, NCCR), the for 2012. Swiss Finance Institute, SCOR and FWF Austrian Science Fund (FWF) allowing us to cover the SFI@EPFL’s external sources include spon- salaries of 50% of our PhD students and 60% of sored research chairs and grants awarded on a our postdoctoral students with third party funds. competitive basis (see Figure 20). Our institute is Furthermore, this year Damir Filipovic has been currently home to four sponsored chairs, three of awarded the prestigious ERC Starting Grant for which were created thanks to contributions from his project on Polynomial Term Structure Models. the Swiss Finance Institute and the fourth funded This grant has a value of CHF 1.2 million and will by Swissquote. support a PhD student and post-doctoral student for five years as from December 2012. The Swiss Finance Institute chairs provide 12 The chairs of Loriano Mancini and Anders Trolle, initiated in funds for the salaries of three tenure track 2009, have just been renewed. The chair of Semyon Malamud, assistant professors, Loriano Mancini, Semyon initiated in 2010, will undergo evaluation next year. Malamud and Anders Trolle. The chairs are limited to a period of three years, which can be extended up to a maximum of eight years de- Figure 20: SFI@EPFL’s third-party revenues in 2012 pending on whether the beneficiaries make sufficient academic progress12. The chairs are 0.3% 5% 2%2% also restricted to the rank of assistant professor. 4% 30% As soon as any of the three junior professors 8% is promoted to associate professor, the chair will expire regardless of whether the maximum 10% TOTAL: CHF 2'349'841 period of eight years has been reached.

The fourth chair at SFI@EPFL is the Swiss quote Chair in Quantitative Finance, which is, 18% as the name indicates, financed by Swissquote. 21% This chair provides funding for the salary of SFI chairs SCOR the chairholder, Damir Filipovic, as well as for Swissquote chair FWF Austrian Science Fund ERC SFI projects general expenses related to the chair’s research Swiss National Science Foundation Unigestion program over a period of ten years. NCCR Others

Table 9: SFI@EPFL revenues in 2010, 2011 and 2012

2010 2011 2012 Budgetary funds CHF 3'370'927 CHF 3'726'670 CHF 3'996'875 Third-party revenues CHF 1'233'900 CHF 1'974'811 CHF 2'349'841 Total CHF 4'604'827 CHF 5'701'481 CHF 6'346'716

38 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 15 . ANNEX

ANNEX 1. Finance research seminars at SFI@EPFL, schedule for 2012 - 2013 (sponsored by Unigestion)

07.06.2013 Michael WEISBACH, The Ohio State University

31.05.2013 Gregory DUFFEE, Johns Hopkins University

24.05.2013 jose SCHEINKMAN, Princeton University

17.05.2013 Andrea EISFELDT, UCLA, Anderson School of Management

26.04.2013 Michael JOHANNES, Columbia University, Graduate School of Business

19.04.2013 Lars A. LOCHSTOER, Columbia University, Graduate School of Business

12.04.2013 Margarita TSOUTSOURA, The University of Chicago, Booth School of Business

15.03.2013 darren KISGEN, Boston College

08.03.2013 Andrew KAROLYI, Cornell University, Johnson Graduate School of Management

01.03.2013 Christopher HENNESSY, London Business School

22.02.2013 Nathalie MOYEN, University of Colorado, Leeds School of Business

15.02.2013 daniel PARAVISINI, London School of Economics

08.02.2013 Miguel FERREIRA, Nova School of Business and Economics, Lisbon

01.02.2013 Sergey TSYPLAKOV, Darla Moore School of Business, University of South Carolina

25.01.2013 Paolo GHIRARDATO, University of Torino

18.01.2013 Evgeny LYANDRES, Boston University

21.12.2012 Financing Through Asset Sales Alex EDMANS, University of Pennsylvania, The Wharton School

14.12.2012 Is the rise of secondary buyouts good news for investors? François DEGEORGE, University of Lugano, Swiss Finance Institute

07.12.2012 Simple variance swaps Ian MARTIN, Stanford Graduate School of Business

23.11.2012 Good Monitoring, Bad Monitoring yaniv GRINSTEIN, Cornell University, Johnson Graduate School of Management

16.11.2012 Precision of Ratings Anastasia KARTASHEVA, Bank for International Settlements

02.11.2012 Optimal Transportation and Robust Hedging of Derivatives Nizar TOUZI, Ecole Polytechnique, Centre de Mathématiques Appliquées

26.10.2012 The Impact of Security Trading on Corporate Restructuring konstantinos E. ZACHARIADIS, London School of Economics

12.10.2012 Idiosyncratic Risk and the Manager Brent GLOVER, Carnegie Mellon University, Tepper School of Business

05.10.2012 Corporate Default Prediction and the RMI Coporate Vulnerability Index jin-Chuan DUAN, National University of Singapore, Risk Management Institute

SELF-EVALUATION REPORT 39 28.09.2012 Investment Horizons and Asset Prices Under Asymmetric Information Elias ALBAGLI, University of Southern California, Marshall School of Business

21.09.2012 Measuring Corporate Default Risk Premia: 2001-2010 darrell DUFFIE, Stanford University, Graduate School of Business

ANNEX 2. Brown Bag Seminars at SFI@EPFL

10.07.2012 From Gossip to Voting Patrick THIRAN, Computer Science Department, EPFL

14.06.2012 Access to Central Bank Operations and Money Market Integration Thomas NELLEN, Swiss National Bank

22.05.2012 Parallel Tournaments Muruvvet BUYUKBOYACI, California Institute of Technology

15.05.2012 Supply-Demand Symmetry of Market Impact Models Carlo ACERBI, MSCI, Analytics Research

03.04.2012 Bank Capital Regulation with an Opportunistic Rating Agency Matthias EFING, SFI, UNIGE

02.04.2012 Can Spanned Term Structure Factors Drive Stochastic Volatility jens CHRISTENSEN, Senior Economist at the Federal Reserve Bank of San Francisco

20.03.2012 Conditional Probabilities and Contagion Measures for Euro Area Sovereign Default Risk Bernd SCHWAAB, European Central Bank, Financial Research

06.12.2011 Information Percolation Driving Volatility daniel ANDREI, UNIL

27.07.2011 damien CHALLET, UNIL & UniFR

30.06.2011 Discretely Sampled Variance Swaps Versus their Continuous Approximations Martin LARSSON, Cornell University

14.06.2011 Alexei ZHDANOV, UNIL, Internal Brown Bag

09.06. 2011 Agostino CAPPONI, Purdue University

24.05.2011 The WACC Fallacy: The Real Effects of Using a unique Discount Rate Philipp KRUEGER, Geneva Finance Research Institute

03.05.2011 Can Equity Volatility Explain the Global Loan Pricing Puzzle Pinar UYSAL, EPFL

40 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 07.04.2011 hamed AMINI, Ecole Normale Supérieure de Paris

05.04.2011 Pareto Optimal Allocations for Probabilistic Sophisticated Variational Preferences on L1 Claudia RAVANELLI, EPFL, Internal Brown Bag

22.03.2011 Credit Default Swaps and Systemic Risk Andreea MINCA, Paris 6 University INRIA

05.03.2011 Higher-Order Infinitesimal Robustness davide LA VECCHIA, University of Lugano

08.02.2011 Eric JONDEAU, UNIL, Internal Brown Bag

25.01.2011 This Time is the Same: Using the Events of 1998 to Explain Bank Returns During the Financial Crisis Ruediger FAHLENBRACH, EPFL, Internal Brown Bag

18.01.2011 Credit Spreads, Factors and Noise Marcin JASKOWSKI, Vienna Graduate School of Finance

11.01.2011 Information Percolation in Centralized Markets julien CUJEAN, EPFL

SELF-EVALUATION REPORT 41 ANNEX 3. Overview of industry internship projects conducted by MFE students

CLASS 2010 Project title Company Topics in Transaction Cost Analysis: an Empirical Investigation Credit Suisse, London Constant Proportion Portfolio Insurance (CPPI) Goldman Sachs, London Princing Trees and Local Volatility Credit Suisse, Zurich Portfolio Stress Testing Models FinLab, Geneva Analysis of Leading Indicators for Commodities Positioning LGT Capital Management, Pfäffikon and Portfolio Optimization. Essays on Asset Pricing with Asymmetric Information Ernst & Young, Geneva Reflective Barrier in the Swiss Exchange Rate - Banque Rothschild, Geneva Partial Equilibrium Model Applications of Malliavin Calculus to the Pricing and Hedging Credit Suisse, Zurich of Derivatives Fundamentally Weighted Benchmarks for Corporate Lombard Odier, Geneva bond Portfolios Variance-Covariance Forecast Model Pooling Lombard Odier, Geneva The Development of Automated Trading Algorithms Olsen, Zurich in Forex Market on the Event-Based Intrinsic Time Pricing Cross Commodity Options in Energy Market Academic thesis Risk Measures in Private Equity Unigestion, Geneva and Implications for Portfolio Management Quantitative Portfolio Management Credit Suisse, Zurich Portfolio Management GlobalView Investments

CLASS 2009 Project title Company Convertible Bonds Valuation Swissquote, Gland Liquidity Comparison Between Different Commodity 4Elements, Singapore Markets: A Framework for Optimal Trading Strategies Tailoring Risks to Returns in Structured Products Deutsche Bank, Geneva Quantitative Portfolio Management - ZKB, Zurich An Application to the Swiss Equity Market Business Valuation Techniques: An Application Helvea, Geneva to the Luxury Goods Industry Interest Rate Modelling in Insurance Risk Management Axa Winterthur Brazil and its Relationship with Modern Portfolio Theory JPMorgan, Geneva Understanding and Pricing of Autocallable Structured HSBC, Paris Products: Numerical valuation through Monte Carlo Methods Using Local Volatility and Stochastic Volatility Models An Exchange Rate Assessment Lombard Odier, Geneva Variance Reduction Methods Julius Baer, Zurich for the Evaluation of Barrier Reverse Convertible Unvealing the Risks of Cliquet Options: Goldman Sachs, London Implications for Pricing and Hedging

42 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Performance Analysis of Alternative Strategies in 4Elements, Singapore Commodities Industry Portfolio Optimization: Theories and Implementations for Hedge Funds FinLab SA, Geneva Yield Curve in the Presence of Sentiment Risk and Excess Volatility Academic thesis Statistical Arbitrage on the VIX Academic thesis Naphta and Lpg Analysis Trafigura, Geneva Financial Consulting for the Los Angeles Community Sanli, Pastore & Hill, Los Angeles College District’s Renewable Energy Program

CLASS 2008 Project title Company The Changing Nature of Commodity Returns BCV, Lausanne Corporate Finance: From Theory to the Real World Lazard Frères, Paris in the Context of M&As Developing Signals and Strategies for Commodity Investments Lombard Odier, Geneva Can Predictable Trading Strategies 4Elements, Singapore of Commodity Market Participants Create Profit Opportunities for Sophisticated Investors? Modeling the Implied Volatility Surface Swissquote, Gland for the Pricing of European Options Estimation of Correlation Based on High Frequency Data Academic thesis Equilibrium Analysis of Portfolio Insurance Academic thesis and its Effects on Option Prices The Pricing and Hedging of ASCOTS Jabre Capital, Geneva

SELF-EVALUATION REPORT 43 44 SWISS FINANCE INSTITUTE – institutional audit 2012 PART B: Activity report 2007 - 2012 SWISS FINANCE INSTITUTE @ EPFL Present position Full Professor, William D. Hacker Peter Professor of Economics and Management and Professor of Finance Bossaerts Address California Institute of Technology M/C 228-77, Pasadena, CA 91125, USA Professor of Finance at SFI@EPFL from August Phone +1 (626) 395 40 28 2007 to July 2012 Email [email protected]

Degrees and employment history

2012 – 2015 honorary Professorial Fellow, University of Melbourne 2012 – present Fellow, Center for Engineering Social and Economic Institutions, University of Zurich 2012 – present Affiliate Faculty, Theoretical Research in Neuroeconomic Decision-Making (TREND), University of Southern California 2007 – 2012 Swiss Finance Institute Professor of Finance, EPFL (part-time, 2009 – 2012) 2006 – present Member of the faculty of the Computation and Neural Systems Program, California Institute of Technology 2006 – 2007 Swiss Finance Institute Visiting Professor, HEC, University of Lausanne (on sabbatical from Caltech) March 2006 Fellow, Center of Excellence, Kobe University April 2004 Guest Professor, University of Zurich 2003 – present William D. Hacker Professor of Economics and Management, California Institute of Technology 1999 – present Research Fellow, Centre for Economic Policy Research (CEPR), London June 1999 Leif Johansen Distinguished Visiting Scholar, Norwegian School of Management, Oslo 1998 – present Professor of Finance, California Institute of Technology (on leave, 2007 – 2009) 1994 – 1998 Associate Professor of Finance (with tenure), California Institute of Technology (on leave, 1994 – 95) Winter 1998 Visiting Associate Professor of Finance, Yale School of Management 1994 – 1996 Research Professor (Center for Economic Research) and Professor of Investments Analysis (Department of Economics) at Tilburg University 1990 – 1994 Assistant Professor of Finance, California Institute of Technology 1987 – 1990 Assistant Professor of Finance, Carnegie Mellon University 1986 – 1987 Postdoctoral Research Fellow, Carnegie Mellon University 1986 Ph.D. in Management, University of California 1981 – 1982 doctorandus (Applied Economics) Universitaire Faculteiten Sint Ignatius, (summa cum laude) 1977 – 1981 Licenciaat (Applied Economics), Universitaire Faculteiten Sint Ignatius, (cum laude)

46 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Research Interests

Peter Bossaerts’ research and publications have encompassed many areas of theoretical, empirical and experimental finance, and related fields such as econometrics, game theory and general equilibrium theory. He has been a pioneer in developing experimental methods for the study of asset pricing theory in the laboratory. Likewise, he has been a pioneer in the neuroscience of decision making under uncertainty. His work borrows tools from many relevant fields, such as decision theory, general equilibrium theory, game theory, cognitive psychology, and decision neuroscience. Earlier, Bossaerts’ work focused on the econometrics of tests of asset pricing theory, studying in particular how to accommodate learning in traditional testing.

Key words

Asset pricing theory, experimental finance, decision neuroscience, neuroeconomics, financial econometrics, game theory.

Publications

• Excessive Volatility Is Also A Feature Of Individual Level Forecasts, A. Nursimulu and P. Bossaerts, Journal of Behavioral Finance, forthcoming. • Hedging Your Bets by Learning Reward Correlations in the Human Brain, K. Wunderlich, M. Symmunds, P. Bossaerts, and R. Dolan, Neuron, vol. 71(6), pp. 1141-1152, 2011. • Separate Encoding of Intuition-Based and Reason-Based Subjective Valuations In The Human Brain, U.R. Beierholm, C. Anen, S. Quartz, and P. Bossaerts, NeuroImage, vol. 58, pp. 955-962, 2011. • The Human Prefrontal Cortex Mediates Integration of Potential Causes Behind Observed Outcomes, K. Wunderlich, U.R. Beierholm, P. Bossaerts, and J.P. O’Doherty, Journal of Neurophysiology, vol. 106(3), pp.1558-1569, 2011. • Differentiable Contributions of Human Amygdalar Subregions in the Computations Underlying Reward and Avoidance Learning, C. Prévost, J.A. McCabe, R.K. Jessup, P. Bossaerts, and J.P. O’Doherty, European Journal of Neuroscience, vol. 34, pp. 1-12, 2011. (Featured article). • The Affective Impact of Financial Skewness on Neural Activity and Choice, C.C. Wu, P. Bossaerts, and B. Knutson, PLoS One, vol. 6(2), pp. 2011, e16838, 2011. • Positive Temporal Dependence of the Biological Clock Implies Hyperbolic Discounting, D. Ray, and P. Bossaerts, Frontiers in Decision Neuroscience, vol. 5(2) doi: 10.3389/fnins.2011.00002, 2011. • Risk, Unexpected Uncertainty, and Estimation Uncertainty: Bayesian Learning in Unstable Settings, E. Payzan-LeNestour and P. Bossaerts, PLoS Computational Biology, vol. 7(1), pp. 1-14, 2011. • The Impact of Disappointment in Decision Making: Inter-Individual Differences and Electrical Neuroimaging, H. Tzieropoulos, R. Grave de Peralta, P. Bossaerts, and Sara L. Gonzalez Andino, Frontiers in Human Neuroscience, vol. 4(235), doi: 10.3389/fnhum.2010.00235, 2010. • MAOA-L Carriers are Better at Making Optimal Financial Decisions under Risk, C. Frydman, C. Camerer, P. Bossaerts, and A. Rangel, Proceedings of The Royal Society B: Biological Sciences, doi:10.1098/rspb.2010.2304, 2010.

A cTIVITy report 2007 - 2012 47 • A Behavioral and Neural Evaluation of Prospective Decision-Making under Risk, Mkael Symmonds, P. Bossaerts, and R.J. Dolan, Journal of Neuroscience, vol. 30(43), pp. 14380-14389, 2010. • Risk and Risk Prediction Error Signals in Anterior Insula, P. Bossaerts, Brain Structure and Function, vol. 214(5-6), pp. 645-653, 2010. • Exploring the Nature of Trading Intuition, A.J. Bruguier, S. Quartz, and P. Bossaerts, Journal of Finance, vol. 65(5), pp. 1703-1723, 2010. • Ambiguity in Asset Markets: Theory and Experiment, P. Bossaerts, P. Ghirardato, S. Guarnaschelli, and W. Zame, Review of Financial Studies, vol. 23(4), pp. 1325-1359, 2010. • Equilibrium Asset Pricing Under Heterogeneous Information, B. Biais, P. Bossaerts, and C. Spatt, Review of Financial Studies, vol. 23(4), pp. 1503-1543, 2010. • The Experimental Study of Asset Pricing Theory, P. Bossaerts, Foundations and Trends in Finance, vol. 3, pp. 289-361, 2009. • Modeling Price Pressure in Financial Markets, E. Asparouhova and P. Bossaerts, Journal of Economic Behavior and Organization, vol. 72(1), pp. 119-130, 2009. • Promoting Intellectual Discovery: Patents Versus Markets, D. Meloso, J. Copic, and P. Bossaerts, Science, vol. 323(5919), pp. 1335-1339, 2009. • What Decision Neuroscience Teaches Us About Financial Decision Making, P. Bossaerts, Annual Review of Financial Economics, vol. 1, pp. 383-404, 2009. • Neural Correlates of Value, Risk, and Risk Aversion Contributing to Decision Making under Risk, G.I. Christopoulos, P.N. Tobler, P. Bossaerts, R.J. Dolan, and W. Schultz, Journal of Neuroscience, vol. 29(40), pp. 12574-12583, 2009. • Encoding of Marginal Utility across Time in the Human Brain, A. Pine, B. Seymour, J.P. Roiser, P. Bossaerts, K.J. Friston, H.V. Curran, and R.J. Dolan, Journal of Neuroscience, vol. 29(30), pp. 9575-9581, 2009. • Explicit Neural Signals Reflecting Reward Uncertainty, W. Schultz, K. Preuschoff, C. Camerer, M. Hsu, C.D. Fiorillo, P.N. Tobler, and P. Bossaerts, Philosophical Transactions of the Royal Society B: Biological Sciences, vol. 363(1511), pp. 3801-3811, 2008. • Neurobiological Studies of Risk Assessment: A Comparison of Expected Utility and Mean-Variance Approaches, M. d’Acremont and P. Bossaerts, Journal of Cognitive, Affective and Behavioral Neuroscience, vol. 8(4), pp. 363-374, 2008. • Neural Correlates of Mentalizing-Related Computations During Strategic Interactions in Humans, A.N. Hampton, P. Bossaerts, and J.P. O’Doherty, Proceedings of the National Academy of Sciences of the United States of America, vol. 105(18), pp. 6741-6746, 2008. • Investigating Signal Integration with Canonical Correlation Analysis of fMRI Brain Activation Data, A. Bruguier, K. Preuschoff, S. Quartz, and P. Bossaerts, NeuroImage, vol. 41 (1), pp. 35-44, 2008. • Markowitz in the Brain?, K Preuschoff, S. Quartz, and P. Bossaerts, Revue d’Economie Politique, vol. 118(1), pp. 75-95, 2008. • Human Insula Activation Reflects Risk Predictions Errors As Well As Risk, K. Preuschoff, S. Quartz, and P. Bossaerts, Journal of Neuroscience, vol. 28(11), pp. 2745-2752, 2008.

48 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 • Towards a Mechanistic Understanding of Human Decision Making: Contributions of Functional Neuroimaging, R.A. Poldrack, A.D. Wagner, J.P. O’Doherty, and P. Bossaerts, Current Directions in Psychological Science, vol. 17(2), pp. 119-123, 2008. • Neural Antecedents of Financial Decisions, B. Knutson and P. Bossaerts, Journal of Neuroscience, vol. 27(31), pp. 8174-8177, 2007. • Adding Prediction Risk to the Theory of Reward Learning, K. Preuschoff and P. Bossaerts, Annals of the New York Academy of Sciences, vol. 1104, pp. 135-146, 2007. • Prices and Allocations in Financial Markets: Theory, Econometrics, and Experiments, P. Bossaerts, C. Plott, and W.R. Zame, Econometrica, vol. 75(4), pp. 993-1038, 2007.

Book chapters and books

• Predicting Risk in a Multiple Stimulus – Multiple Reward Environment, M d'Acremont, M. Gilli and P. Bossaerts In: J.C. Dreher and L. Tremblay (eds.), Handbook of Reward and Decision Making, pp. 459-473, Academic Press, 2009. • Decision Making in Financial Markets, P. Bossaerts. In: L. Squire (ed.), Encyclopedia of Neuroscience, pp. 339-346, Elsevier, 2009. • Asset Pricing, P. Bossaerts. In: C.R. Plott and V.L. Smith (eds.), Handbook of Experimental Economics Results, vol. 1, North-Holland, 2008. • From Market Jaws to the Newton Method: The Geometry of How A Market Can Solve Systems of Equations, P. Bossaerts and C.R. Plott. In: C.R. Plott and V.L. Smith (eds.), Handbook of Experimental Economics Results, vol. 1, North-Holland, 2008. • The Neurobiological Foundations of Valuation in Human Decision Making under Uncertainty, P. Bossaerts, K. Preuschoff, and M. Hsu. In: P.W. Glimcher et al. (eds), Neuroeconomics: Decision Making and the Brain, pp. 353-366, Academic Press, 2008. • Risk Aversion in Laboratory Asset Markets, W. Zame and P. Bossaerts. In: G.W. Harrison and J.C. Cox (eds.), Risk Aversion in Experiments, vol. 12, pp. 341-358, JAI Press, 2008.

Former PhD students

• Anjali Nursimulu, Demystifying Rational Financial Decision-Making: Insights from Neurofinance, EPFL, 2011 • Elise Payzan-Le Nestour, Essays on Individual Decision Making under Uncertainty, EPFL, 2009

Awards

2011 Lloyd’s Science of Risk 2011 Prize for the article “Hedging Your Bets by Learning Reward Correlations in the Human Brain” published in Neuron

A cTIVITy report 2007 - 2012 49 Invited talks (selected examples)

2011 “The Human Brain Behind Financial Skill”: Swiss Finance Institute Annual Meeting, Switzerland 2011 “Neurobiological Foundations of Decision Making under Uncertainty”: Finance Down Under: Building on the Best from the Cellars of Finance, University of Melbourne, Australia 2010 “Market Bubbles and Crashes as an Expression of Tension between Social and Individual Rationality: Theory and Experiments”: WISE International Workshop on Experimental Economics and Finance, Xiamen University, China 2010 “Experiments on Market Dynamics”: Experimental Finance 2010 Conference, University of Gothenburg, Sweden 2009 “Potential Policy Implications of Neuroeconomics”: The Social Brain, symposium organized by the Royal Academy of Arts, Manufacture and Commerce (RSA) and the Wellcome Trust, London, UK

Grants

2011 – 2013 National Science Foundation Project title: Market Bubbles As Expression of Social Norms: Experiments Budget: USD 350’000

2008 – 2012 SystemsX.ch (Swiss National Science Foundation) Project title: Neural Correlates of Collective Decision Making: From Molecules to Minds Budget: CHF 250’000

2008 – 2013 NCCR FINRISK (Swiss National Science Foundation) Project title: Behavioural Finance Budget: CHF 160’000

Teaching activities

EPFL • Design of market-based solutions to allocation problems (MFE, 2 ECTS, 2012) • Design of market-based solutions to allocation problems (MFE, 4 ECTS, 2010 – 2011) • Game theoretic foundations of market microstructure theory (MFE, 6 ECTS, 2009) • Neuroeconomics (MFE, 5 ECTS, 2009) • Introductory finance (MFE, 6 ECTS, 2008 – 2009) • Experimental finance (PhD Program in Finance, 2008)

50 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Professional services and activities

EPFL • Chair, Search Committee, Swiss Finance Institute (six) professorial positions in finance, EPFL, 2007 – 2009 • Co-Interim-Director (with Christopher Tucci and Ralf Seifert), CDM, EPFL, 2008 • Program Chair (and Developer), Master in Financial Engineering, EPFL, 2007 – 2008

Others President, Society for Neuroeconomics, 2011 – 2012

A cTIVITy report 2007 - 2012 51 Present position Full Professor, Pierre Professor of Finance Address École polytechnique fédérale de Lausanne Collin- Swiss Finance Institute at EPFL Quartier UNIL-Dorigny, Extranef 209 Dufresne CH-1015 Lausanne Phone +41 (0)21 693 01 36 Email [email protected]

Degrees and employment history

2011 – present Pr ofessor of Finance, EPFL 2008 – present Carson Family Professor, Graduate School of Business, Columbia University 2005 – 2008 Goldman Sachs Asset Management: Senior Portfolio Manager, Credit and Fixed Income Strategies, Quantitative Strategies Group 2004 – 2007 Associate Professor, Haas School of Business, UC Berkeley 2003 – 2004 Associate Professor with Indefinite Tenure, GSIA, Carnegie Mellon University 1998 – 2002 Assistant Professor, GSIA, Carnegie Mellon University 1998 Ph.D. (Finance), HEC School of Management, Jouy-en-Josas, France Dissertation Chair: Prof. Bernard Dumas and Prof. Bruno Solnik Title: “Four Essays in Continuous Time Asset Pricing” 1992 D.E.A. (M.A.) in Mathematical Economics, EHESS, Paris, France 1991 B.S. Degree in Business, HEC School of Management

Research interests

Pierre’s research focuses on dynamic asset pricing with an emphasis on credit and fixed income markets. He has investigated credit derivatives markets, both empirically and theoretically, proposing and testing models for pricing Credit Default Swaps and Collateralized Debt Obligations. Recently, he has worked on models of credit contagion with an emphasis on the European sovereign crisis. His recent research also focuses on how to measure market liquidity, and in particular, how to construct measures of price impact that capture the adverse selection risk among traders.

Key words

Term structure, fixed income, credit risk, credit default swaps, securitization, collateralized debt obligation, credit contagion, sovereign risk, liquidity measures, adverse selection.

Current PhD students

• Vincent Bogousslavsky • Christopher Trevisan

52 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Publications

• On the Relative Pricing of Long Maturity Index Options and Collateralized Debt Obligations, P. Collin-Dufresne, R.S. Goldstein, and F. Yang, Journal of Finance, vol. 67(6), pp. 1983-2014, 2012. • Explaining Asset Pricing Puzzles Associated with the 1987 Market Crash, L. Benzoni, P. Collin-Dufresne, and R.S. Goldstein, Journal of Financial Economics, vol. 101(3), pp. 552-573, 2011. • A Short Introduction to Correlation Markets, P. Collin-Dufresne, Journal of Financial Econometrics, vol. 7 (1), pp. 12-29, 2009. • Can Interest Rate Volatility Be Extracted from the Cross Section of Bond Yields?, P. Collin-Dufresne, R.S. Goldstein, and C.S. Jones, Journal of Financial Economics, vol. 94(1), pp. 47-66, 2009. • On the Relation Between the Credit Spread Puzzle and the Equity Premium Puzzle, L. Chen, P. Collin-Dufresne, and R.S. Goldstein, Review of Financial Studies, vol. 22(9), pp. 3367-3409, 2009. • Identification of Maximal Affine Term Structure Models, P. Collin-Dufresne, R.S. Goldstein, and C.S. Jones, Journal of Finance, vol. 63(2), pp. 743-795, 2008. • Portfolio Choice over the Life-Cycle when the Stock and Labor Markets Are Cointegrated, L. Benzoni, P. Collin-Dufresne, and R.S. Goldstein, Journal of Finance, vol. 62(5), pp. 2123-2167, 2007. • Pricing and Hedging in the Presence of Extraneous Risks, P. Collin-Dufresne and J. Hugonnier, Stochastic Processes and their Applications, 117(6), pp. 742-765, 2007.

Former PhD students

• Damla Gunes (2012) (Thesis Committee) (Columbia, Operations Research) • Matthias Juettner (2012) (Thesis Committee, Outside Reader) (ETH, Zurich) • Yiqun (Ethan) Mou (2010) (Thesis Committee Chair) (Columbia, Finance) (Merrill Lynch) • Vyacheslav Fos (2010) (Thesis Committee) (Columbia, Finance) (UIUC) • Francisco Barillas (2010) (Outside Reader, Thesis Committee) (NYU, Finance) (Emory University) • Andreas Stathopoulos (2008) (Thesis Committee) (Columbia, Finance) (USC) • Yael Eisenthal (2008) (Chair, Thesis Committee) (Columbia, Finance) (GSAM)

Awards

2010 WFA CME Group Award for the best paper in derivatives markets for “On the Relative Pricing Relative Pricing of Long Maturity SP 500 Index Options and CDX Tranche”

2008 Finalist (nominated) for the Smith-Breeden Prize of the American Finance Association for“Identification of Maximal Affine Term Structure Models”

A cTIVITy report 2007 - 2012 53 Invited talks (selected examples)

2013 Winter School in Mathemtical Finance, Korteweg-de Vries Institute for Mathematics, University of Amsterdam 2012 Keynote lectures (2) on “Asset Allocation and Long Run Endowment Risk”, Netspar (Amsterdam), UNIL-Institute of Banking and Finance Conference on “Long Term Asset Management” (Lausanne), Centre for Asset Pricing Research at BI Norwegian School of Business (Oslo), NBIM Financial Research Conference Roundtable on “Time-Varying Expected Returns and Correlation” (Oslo), NCCR-FINRISK Workshop on Asset Pricing (Getrzensee), HEC (Paris), INSEAD (Paris), Copenhagen Business School (Copenhagen), IESE-ESADE (Barcelona), BI Norwegian School of Business (Oslo), University of Zurich (Zurich), European Summer Symposium in Financial Markets (organizer of “Focus session on Credit Risk,”Gerzensee) 2011 First Annual Roundtable on “Treasury Markets and Debt Management”, US Treasury (NY), Kepos Capital (NY), European Central Bank (Frankfurt) 2010 Credit Risk Summit (Standard & Poors, NY), Swissquote Conference on Credit Risk (Lausanne), Bachelier World Symposium (Toronto), New York Quantitative Finance Seminar (Blackrock), AQR Capital (Greenwich), Fields Institute Quantitative Finance Seminar (Toronto), Risk USA 2010 Panel (NY), Carnegie Mellon, Dallas, Madison- Wisconsin, Princeton, Warwick, Vienna, Lausanne, Zurich, Federal Reserve Bank Washington DC, UCLA, Amsterdam, Vanderbilt, WFA (Victoria) 2009 “The Future of Quantitative Asset Management”, Society for Quantitative Analysts (Bloomberg), “Credit Models After the Crisis” (NYU Derivative’s Symposium) 2008 Institutional Investors “New Dimensions of Retirement Plans” (New-York), Society for Financial Econometrics (SoFiE) Inaugural Conference (New-York), 15th Mitsui Life Syposium on Global Financial Markets, University of Michigan (Ann Arbor), The Changing Nature of Credit Markets (SIFR Stockholm), Financial Crisis Research Conference “The Quant Credit Crisis” (Columbia), Federal Reserve Bank of Chicago's 14th Annual Capital Markets Conference, Duke University, London Business School (Man Group Seminar), London School of Economics 2007 Federal Reserve Board Credit Risk Conference (DC), New York Quantitative Finance Seminar (NY), Rady Risk Management Conference (UCSD), Global Derivatives & Risk Conference (Paris), GS Quantitative Finance Conference, (Lugano), 5th Gutmann Center Symposium on “Credit Risk and Management of Fixed Income Portfolios” (Vienna Univ), 3rd Vienna Symposium on Asset Management “Global Bond Portfolios” (Vienna)

54 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Teaching activities

• Theory of financial economics (PhD) • Credit derivatives (MFE) • Advanced derivatives (MBA) • Introductory finance (Undergraduate) • Continuous time finance (PhD) • Advanced debt markets (Master in Computational Finance) • Term structure theory and credit derivatives (Master in Computational Finance) • Futures, options and other derivatives (MBA) • Applied stochastic calculus for finance (MFE)

Professional services and activities

Consulting assignments • Expert Witness Consultant - Cornerstone Research (2012 – present) • Consultant Federal Reserve Bank of New York (2009 – 2011)

Affiliation and Committees • NBER Research Associate (since 2004) • Moody’s Academic Research and Advisory Committee (2003 – 2007) • American Finance Association Program Committee (2006, 2007, 2010, 2011) • Western Finance Association Program Committee (2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011, 2012) • European Finance Association Program Committee (2009, 2010, 2011, 2012) • European Financial Management Association Program Committee (2012) • Financial Management Association Annual Meeting Program Committee (2003, 2011, 2012) • Financial Management Association Fixed Income Awards Committee (2000, 2008) • Center for Computational Finance, Carnegie Mellon University • Inquire Europe Academic Advisory Board (2009 – present) • Member of The Executive Council of the Bachelier Finance Society (2009 – present) • Society for Financial Econometrics (SOFIE) program committee (2010 – 2011) • Practitioner Director, Financial Management Association (2011 – present) • Netspar Research Fellow (2011 – present) • Scientific Committee of the Institut de la Finance Structurée et des Instruments Dérivés de Montréal (2011 – present) • Program Committee of the Arizona State University Sonoran Winter Conference (2012) • Program Committee of Geneva Finance Research Institute Conference on “Liquidity & Arbitrage Trading” Conference (Oct 2012)

Conference Discussant 2012 AFA (Chicago), ES (Chicago), Adam Smith Conference (Oxford), Center for Asset Pricing Research at BI Norwegian School of Business (Oslo) 2011 Swissquote Conference on Asset Management (Lausanne), Credit Risk conference on Stability and Risk Control in Banking, Insurance and Financial Markets (Venice) 2010 AFA (Atlanta) 2009 Central Bank Liquidity Tools (NY-FED), NBER (Stanford) 2008 WFA (Hawai) 2007 NBER-AP (Chicago), Moody’s Credit Risk Conference (Copenhagen), NBER-AP (Boston)

A cTIVITy report 2007 - 2012 55 Session Chair 2007 – 2011 AFA, WFA

Referee Journals: The Review of Financial Studies, The Journal of Finance, The Journal of Financial Economics, The Journal of Quantitative Analysis, The Review of Finance, Econometrica, American Economic Review, Finance and Stochastics, Journal of Computational Finance, Management Science, The European Finance Review, The Journal of Risk, The Journal of Banking and Finance, The Journal of Econometrics, Financial Management, Financial Review, The Journal of Economic Dynamics and Control, The Jounal of Empirical Finance, Bank of England, Mathematical Finance, The Review of Derivatives Research

Books: Prentice Hall, Pearson, Wiley

Projects: Assessor for Research Project Funded by the Program for Collaborative Research Initiatives (CRSHC / SSHRC, Ottawa Canada), Reviewer for NBER Research Grants, Member of the Final Review Group of the LBS Masters in Finance (London, Jan 2012)

Editorial Roles • Associate Editor, The Journal of Financial and Quantitative • Analysis (2006 – 2009) • Associate Editor, Finance and Stochastics (2006 – 2011) • Co-Editor, Finance and Stochastics (2012 – present) • Editorial Board, Mathematics and Financial Economics (2007 – 2010) • Associate Editor, Management Science (2008 – 2011) • Associate Editor, International Journal of Central Banking (2009 – present) • Associate Editor, European Financial Management (2008 – present) • Associate Editor, The Review of Finance (2010 – present)

Academic Advisory Board • Moody’s-KMV (2007) • kepos Capital (2010 – present) • Sancus Capital (2010 – present)

56 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 A cTIVITy report 2007 - 2012 57 Present position Associate Professor Rüdiger (with tenure) of Finance Address École polytechnique fédérale de Lausanne Fahlenbrach Swiss Finance Institute at EPFL Quartier UNIL-Dorigny, Extranef 211 CH-1015 Lausanne Phone +41 (0)21 693 00 98 Email [email protected]

Degrees and employment history

2012 – present Professor of Finance (Associate Professor with tenure), EPFL 2012 Visiting Professor at Vienna Graduate School of Finance (Apr 2012), Copenhagen Business School (Jul 2012) 2011 Visiting Professor at University of New South Wales, Sydney (Mar 2011 – Apr 2011) 2009 – 2012 Pr ofessor of Finance (Assistant Professor), EPFL 2004 – 2009 Assistant Professor, Fisher College of Business, Ohio State University 2005 Ph.D. in Finance, The Wharton School, University of Pennsylvania 2001 M.A. in Finance, The Wharton School, University of Pennsylvania 1999 Diplom-Kaufmann, University of Mannheim 1999 Diplomé de l’ESSEC, ESSEC, Cergy

Research interest

Ruediger Fahlenbrach has research interests in empirical corporate finance, in particular corporate governance. His research is concerned with the resolution of corporate governance problems arising from the separation of ownership and control in the modern public corporation. He uses empirical methods to study how different governance mechanisms may help resolve principal-agents problems. Ruediger has studied whether different ownership structures, in particular concentrated ownership by both outside investors and insiders can help align the interests of managers and shareholders. He has recently contributed to the emerging literature on understanding the causes of the financial crisis of 2007 and 2008. This research has been reported in many large-circulation newspapers such as The New York Times, The Wall Street Journal, The Economist, Le Temps, NZZ, Handelsblatt, Forbes Magazine, USA Today, and Fortune Magazine.

Keywords

Corporate governance, corporate finance, principal-agent problems, large shareholders, executive compensation

58 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Current PhD students

• Hoang Ngoc Giang • Christoph Herpfer • Cornelius Schmidt (UNIL) • Yalda Sigrist

Publications

• CEO Contract Design: How Do Strong Principals Do It? H. Cronqvist and R. Fahlenbrach, Journal of Financial Economics, forthcoming. • Institutional Investors and Mutual Fund Governance: Evidence from Retail – Institutional Fund Twins, R.B. Evans and R. Fahlenbrach, Review of Financial Studies, vol. 25, pp. 3530-3571, 2012. • This Time is the Same: Using Bank Performance in 1998 to Explain Bank Performance During the Recent Financial Crisis, R. Fahlenbrach, R. Prilmeier, and R.M. Stulz, Journal of Finance, vol. 67, pp. 2139-2185, 2012. • Bank CEO Incentives and the Credit Crisis, R. Fahlenbrach and R.M. Stulz, Journal of Financial Economics, vol. 99(1), pp. 11-26, 2011. • Estimating the Effects of Large Shareholders Using a Geographic Instrument, B. Becker, H. Cronqvist, and R. Fahlenbrach, Journal of Financial and Quantitative Analysis, vol. 46(4), pp. 907-942, 2011. • Former CEO Directors: Lingering CEOs or Valuable Resources?, R. Fahlenbrach, B.A. Minton, and C.H. Pan, Review of Financial Studies, vol. 24(10), pp. 3486-3518, 2011. • Does Information Drive Trading in Option Strategies?, R. Fahlenbrach and P. Sandas, Journal of Banking & Finance, vol. 34(10), pp. 2370-2385, 2010. • Why do Firms Appoint CEOs as Outside Directors?, R. Fahlenbrach, A. Low, and R.M. Stulz, Journal of Financial Economics, vol. 97(1), pp. 12-32, 2010. • Large Shareholders and Corporate Policies, H. Cronqvist and R. Fahlenbrach, Review of Financial Studies, vol. 22(10), pp. 3941-3976, 2009. • Founder-CEOs, Investment Decisions, and Stock Market Performance, R. Fahlenbrach, Journal of Financial and Quantitative Analysis, vol. 44(2), pp. 439-466, 2009. • Managerial Ownership Dynamics and Firm Value, R. Fahlenbrach and R.M. Stulz, Journal of Financial Economics, vol. 92(3), pp. 342-361, 2009. • Shareholder Rights, Boards, and CEO Compensation, R. Fahlenbrach, Review of Finance, vol. 13(1), pp. 81-113, 2009. • Co-Movements of Index Options and Futures Quotes, R. Fahlenbrach and P. Sandas, Journal of Empirical Finance, vol. 16(1), pp. 151-163, 2009.

A cTIVITy report 2007 - 2012 59 Former PhD students

• Jan-Peter Kulak (supervisor), EPFL, 2012. On the job market • Philip Valta, EPFL, 2010. First placement: HEC Paris (Assistant Professor) • Rose C. Liao, Ohio State University – Fisher College of Business, 2010. First placement: Rutgers Business School (Assistant Professor) • Jérôme Taillard, Ohio State University – Fisher College of Business, 2010. First placement: Boston College (Assistant Professor) • Jeff Jiewei Yu, Ohio State University – Fisher College of Business, 2007. First placement: M.I.T. Sloan School of Management (Assistant Professor) • Angie Low, Ohio State University – Fisher College of Business, 2007. First placement: Nanyang Technological University, Singapore (Assistant Professor) • Carrie Pan, Ohio State University – Fisher College of Business, 2007. First placement: Santa Clara University (Assistant Professor)

Awards

2012 Swiss Finance Institute Senior Chair 2012 Distinguished Referee Award, Review of Financial Studies 2011 Best Teacher Award, EPFL Master of Financial Engineering 2010 Swiss Finance Institute / Banque Privée Espírito Santo Prize 2009 – 2012 Swiss Finance Institute Junior Chair 2009 Outstanding Teaching in a Major, Fisher College of Business Undergraduate Program, Ohio State University 2006, 2007, 2008, 2009 Outstanding Full-Time MBA Core Professor, Fisher College of Business, Ohio State University

Invited talks (selected examples)

2012 Western Finance Association; London Business School; Vienna University; Manchester Business School; Copenhagen Business School; Humboldt University Berlin; University of Lugano 2011 Keynote speaker, Executive Compensation after the Financial Crisis International Conference at Copenhagen Business School; HKUST Finance Symposium on Corporate Finance; Aalto University Helsinki; University Bocconi; Università Cattolica; Milan; IESE Barcelona; European Central Bank; Frankfurt School of Finance and Management; University of Hamburg; Vienna University; University of Sydney; University of Technology, Sydney; Singapore Management University; Nanyang Technological University; Chinese University of Hong Kong; University of New South Wales; Queensland University 2010 Geneva University; ISCTE/NOVA Lisbon; University of Zurich; University of Bern; University of Alabama; University of Neuchâtel; HEC Paris; University of Karlsruhe 2007 – 2012 American Finance Association

60 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Grants

2012 – 2015 Swiss Finance Institute Project title: The Financial Crisis of 2007/2008: Causes and Consequences Budget: CHF 165’000

2011 – 2013 Swiss National Science Foundation Project title: Private Equity Sponsors and the Structure of CEO Compensation and Employment Contracts Budget: CHF 150'000

2011 – 2012 Inquire Europe Project title: Dual Management of Retail and Institutional Portfolios Budget: CHF 25’000

Teaching activities

EPFL • Introduction to finance (MFE, 6 ECTS) • Venture capital and private equity (MFE, 4 ECTS) • Empirical corporate finance, jointly with Norman Schuerhoff, • University of Lausanne (PhD Program in Finance, 4 ECTS)

Professional services and activities

EPFL • Database management SFI@EPFL • Ph.D. program selection committee • Teaching committee SFI@EPFL Others • Associate Editor, Financial Management • Member WFA, AFA • Program Committee EFA, WFA (2008 – present) Referee Ad hoc referee for Journal of Banking and Finance, Journal of Corporate Finance, Journal of Empirical Finance, Journal of Finance, Journal of Financial and Quantitative Analysis, Journal of Financial Economics, Journal of Financial Intermediation, Journal of Money, Credit, and Banking, Management Science, Pacific-Basin Finance Journal, Research Grants Council of Hong Kong, Review of Corporate Finance Studies, Review of Finance, Review of Financial Studies, Zeitschrift für Betriebswirtschaftslehre.

A cTIVITy report 2007 - 2012 61 Present position Full Professor, Damir Swissquote Chair in Quantitative Finance Address École polytechnique fédérale de Lausanne Filipovic Swiss Finance Institute at EPFL Quartier UNIL-Dorigny, Extranef 218 CH-1015 Lausanne Phone +41 (0)21 693 01 08 Email [email protected]

Degrees and employment history

2010 – present Professor of Finance, Swissquote Chair in Quantitative Finance, EPFL 2007 – 2009 Full Professor, Faculty of Business, Economics and Statistics, University of Vienna 2004 – 2007 Full Professor, Chair of Financial and Insurance Mathematics, Department of Mathematics, University of Munich December 2006 Visiting Professor, Faculty of Business, University of Technology Sydney 2003 – 2004 Scientific Consultant for Solvency Testing and Risk Analysis in Insurance, Swiss Federal Office of Private Insurance (BPV), and Senior Researcher, Department of Mathematics, ETH Zurich 2002 – 2003 Tenure-Track Assistant Professor, Department of Operations Research and Financial Engineering, Princeton University 2000 – 2002 Visiting Scholar, Department of Financial and Actuarial Mathematics, Vienna University of Technology (Nov 2000 – Dec 2000), Morgan Stanley Visiting Scholar, Graduate School of Business, Stanford University (Jan 2001 – Feb 2001), Visiting Research Fellow, Bendheim Center for Finance, Princeton University (Mar 2001), Adjunct Assistant Professor, Department of Mathematics and Statistics, Columbia University (Apr 2001 – May 2001), Postdoctal Research Fellow, Department of Mathematics, ETH Zurich (Jun 2001 – Jan 2002) 2000 Ph.D. in Mathematics, ETH Zurich 1995 diploma in Mathematics, ETH Zurich

Research interest

My research focus is in mathematics and applications in finance and risk management. In particular, I am elaborating on stochastic models for the term structure of interest rates, credit risk, and volatility risk. In this context I study more fundamental issues in stochastic analysis, such as the theory of polynomial preserving or affine Markov processes. I am also interested in the empirical counterpart where we develop and test new efficient model estimation methods. On the quantitative risk management side, I am working on insurance solvency related topics, such as scenario aggregation or model estimation for the Swiss Solvency Test and Solvency II. On a more general level I study systemic and liquidity risks on networks of financial institutions.

62 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Key words

Mathematical finance, stochastic analysis, interest rate models, credit risk models, volatility risk models, quantitative risk management, solvency, systemic risk.

Current postdocs

• Dr. Hamed Amini • Dr. Klaas Schulze

Current PhD students

• Mathieu Cambou • Emmanuel Leclercq

Publications

• Density Approximations for Multivariate Affine Jump-Diffusion Processes, D. Filipovic, E. Mayerhofer and P. Schneider, Journal of Econometrics, forthcoming. • The Term Structure of Interbank Risk, D. Filipovic and A. Trolle, Journal of Financial Economics, forthcoming. • Affine Variance Swap Curve Models, Seminar on Stochastic Analysis, Random Fields and Applications VII, Progress in Probability, Springer Basel, forthcoming. • Approaches to Conditional Risk, D. Filipovic, M. Kupper, and N. Vogelpoth, SIAM Journal on Financial Mathematics, vol. 3(1), pp. 402-432, 2012. • Conditional Density Models for Asset Pricing, D. Filipovic, L.P. Hughston, and A. Macrina, International Journal of Theoretical and Applied Finance, vol. 15(1), pp. 1-24, 2012. • The Canonical Model Space for Law-Invariant Convex Risk Measures is L¹, D. Filipovic and G. Svindland, Mathematical Finance, vol. 22(3), pp. 585-589, 2012. • Affine Processes on Positive Semidefinite Matrices, C. Cuchiero, D. Filipovic, E. Mayerhofer, and J. Teichmann, Annals of Applied Probability, vol. 21(2), pp. 397-463, 2011. • Dynamic CDO Term Structure Modelling, D. Filipovic, L. Overbeck, and T. Schmidt, Mathematical Finance, vol. 21(1), pp. 53-71, 2011. • Term Structure Models Driven by Wiener Process and Poisson Measures: Existence and Positivity, D. Filipovic, S. Tappe and J. Teichmann, SIAM Journal on Financial Mathematics, vol. 1, pp. 523-554, 2010. • Jump-Diffusions in Hilbert Spaces: Existence, Stability and Numerics, D. Filipovic, S. Tappe, and J. Teichmann, Stochastics – An International Journal of Probability and Stochastic Processes, vol. 82(5), pp. 475-520, 2010. • A Note on the Dai-Singleton Canonical Representation of Affine Term Structure Models, P. Cheridito, D. Filipovic, and R.L. Kimmel, Mathematical Finance, vol. 20(3), pp. 509-519, 2010. • Consistent Market Extensions under the Benchmark Approach, D. Filipovic and E. Platen, Mathematical Finance, vol. 19(1), pp. 41-52, 2009. • Multi-Level Risk Aggregation, D. Filipovic, ASTIN Bulletin, vol. 39(2), pp. 565-575, 2009. • Separation and Duality in Locally L°-Convex Modules, D. Filipovic, M. Kupper, and N. Vogelpoth, Journal of Functional Analysis, vol. 256(12), pp. 3996-4029, 2009.

A cTIVITy report 2007 - 2012 63 • A Note on Natural Risk Statistics, S. Ahmed, D. Filipovic and G. Svindland, Operations Research Letters, vol. 36(6), pp. 662-664, 2008. • Optimal Capital and Risk Allocations for Law- and Cash-Invariant Convex Functions, D. Filipovic and G. Svindland, Finance and Stochastics, vol. 12(3), pp. 423-439, 2008. • Optimal Numeraires for Risk Measures, D. Filipovic, Mathematical Finance, vol. 18(2), pp. 333-336, 2008. • A Note on the Swiss Solvency Test Risk Measure, D. Filipovic and N. Vogelpoth, Insurance: Mathematics and Economics, vol. 42(3), pp. 897-902, 2008. • Existence of Levy Term Structure Models, D. Filipovic and S. Tappe, Finance and Stochastics, vol. 12(1), pp. 83-115, 2008. • Equilibrium Prices for Monetary Utility Functions, D. Filipovic and M. Kupper, International Journal of Theoretical and Applied Finance, vol. 11(3), pp. 325-343, 2008. • Optimal capital and risk transfers for group diversification, D. Filipovic and M. Kupper, Mathematical Finance, vol. 18(1), pp. 55-76, 2008. • Credit Derivatives in an Affine Framework, L. Chen and D. Filipovic, Asia-Pacific Financial Markets, vol. 14(1-2), pp. 123-140, 2007. • On the Group Level Swiss Solvency Test, D. Filipovic and M. Kupper, Bulletin of the Swiss Association of Actuaries, vol. 1, pp. 97-115, 2007. • Monotone and Cash-Invariant Convex Functions and Hulls, D. Filipovic and M. Kupper, Insurance: Mathematics and Economics, vol. 41(1), 1-16, pp. 2007. • Market Price of Risk Specifications for Affine Models: Theory and Evidence, P. Cheridito, D. Filipovic and R.L. Kimmel, Journal of Financial Economics, vol. 83(1), pp. 123-170, 2007.

Book chapters and books

• Doubly Stochastic CDO Term Structures, D. Filipovic, L. Overbeck, and T. Schmidt. In: R.C. Dalang et al. (eds.), Seminar on Stochastic Analysis, Random Fields and Applications VI, Progress in Probability, vol. 63, pp. 413-428, Springer, 2011. • Pricing and Hedging of CDOs: A Top Down Approach, D. Filipovic and T. Schmidt. In: C. Chiarella and A. Novikov (eds.), Contemporary Quantitative Finance, pp. 231-253, Springer, 2010. • Affine Models, C. Cuchiero, J. Teichmann and D. Filipovic. In: R. Cont (ed.), Encyclopedia of Quantitative Finance, pp. 16-20, John Wiley & Sons, 2010. • Affine Diffusion Processes: Theory and Applications, D. Filipovic and E. Mayerhofer. In: H.W. Engl et al. (eds.), Radon Series on Computational and Applied Mathematics, De Gruyter, vol. 8, pp. 1-40, 2009. • Realizable Group Diversification Effects. D. Filipovic and A. Kunz, In: Life & Pensions, May 2008.

Former PhD students

• Zehra Eksi, Essays in Credit and Inflation Linked Derivatives, University of Vienna, 2011. • Christa Cuchiero (co-supervisor), Vienna University of Technology/ETH Zurich, 2011 • Nicolas Vogelpoth, L0-convex Analysis and Conditional Risk Measures, University of Vienna, 2009. • Gregor Svindland, Risk Measures Beyond Bounded Risks, University of Munich, 2009.

64 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Awards

2010 Swiss Finance Institute Senior Chair 2010 AXA-EGRIE Prize, World Risk and Insurance Economics Congress, Singapore

Invited talks (selected examples)

2012 10th German Probability and Statistics Days, Mainz 2011 7th Seminar on Stochastic Analysis, Random Fields and Applications, Ascona 2010 6th World Congress of the Bachelier Finance Society, Toronto 2009 Quantitative Methods in Finance Conference, Sydney 2008 12th International Congress on Insurance: Mathematics and Economics, Dalian, China 2008 6th Seminar on Stochastic Analysis, Random Fields and Applications, Ascona

Grants

2012 – 2017 ERC Starting Grant Project title: Polynomial Term Structure Models Budget: EUR 995’155

2011 – 2014 SCOR Actuarial Fellowship for Doctoral Students Budget: CHF 289’500

2009 – 2013 NCCR FINRISK (Swiss National Science Foundation) Project title: Dynamic Asset Pricing (Principal Investigator) Budget: CHF 600’000

2010 – 2013 FWF (Austrian Science Fund) Project title: Dynamic Collateralized Debt Obligations Modeling Budget: EUR 262’682

2007 – 2012 WWTF (Vienna Science and Technology Fund) Science Chair in “Mathematics and Economics” Budget: EUR 1’500’000

A cTIVITy report 2007 - 2012 65 Teaching activities

EPFL • Fixed income analysis (MFE, 2011) • Stochastic calculus II (MFE, 2010 – 2012) • Credit risk and fixed income analysis (MFE, 2010)

WU Executive Academy Advanced financial mathematics and structured derivatives: interest rate derivatives (with A. Pelsser, 2008)

Vienna Graduate School of Finance Interest rate models (2009, 2008)

Professional services and activities

Conference committees • Scientific Committee, 8th World Congress of the Bachelier Finance Society, Brussels, 2014. • Organizer, Invited Paper Session on Stochastics in Finance, 29th European Meeting of Statisticians, Budapest, 2013. • Organizer, Swissquote Conference on Liquidity and Systemic Risk, Lausanne, 2012. • Scientific Advisory Committee, 7th World Congress of the Bachelier Finance Society, Sydney, 2012. • Organizer, Swissquote Conference on Asset Management, Lausanne, 2011. • Organizer, Special Session on Affine Processes and Applications in Finance, Applied Probability Society Conference, Stockholm, 2011. • Organizer, Princeton-Lausanne Workshop on Quantitative Finance, Lausanne, 2011. • Organizer, Swissquote Conference on Interest Rate and Credit Risk, Lausanne, 2010. • Organizer, Special Session on Mathematical Finance, 33rd Conference on Stochastic Processes and their Applications, Berlin, 2009. • Scientific Committee, 5th World Congress of the Bachelier Finance Society, London, 2008. • Co-organizer of the Annual Scientific Day of the German Association for Actuarial and Financial Mathematics (DGVFM), 2005 – 2008.

Others • Head of SFI@EPFL, Jan 2011 – present. • Director of the Swiss Finance Institute PhD program at EPFL, Aug 2010 to Dec 2011. • Member of the Council of the Bachelier Finance Society, since 2010. • Selection Committee Member for SCOR Fellowship Switzerland, since 2010. • Faculty Member of the Vienna Graduate School of Finance, Oct 2007 to Dec 2009. • Committee Member for SCOR's Actuarial Prize Germany, since 2008. • Research Fellow, Netspar (Network for Studies on Pensions, Aging and Retirement), Apr 2008 to Dec 2011. • Member of the Board of Directors of Swiss Life Holding Ltd, since May 2011.

66 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 A cTIVITy report 2007 - 2012 67 Present position Associate Professor (with tenure) of Finance Julien Address École polytechnique fédérale de Lausanne Swiss Finance Institute at EPFL Hugonnier Quartier UNIL-Dorigny, Extranef 212 CH-1015 Lausanne Phone +41 (0)21 693 01 14 Email [email protected]

Degrees and employment history

2009 – present Associate Professor of Finance, École Polytechnique Fédérale de Lausanne (EPFL) 2004 – 2009 Assistant Professor of Finance, University of Lausanne 2002 – 2004 Assistant Professor of Finance, HEC Montréal 2000 – 2002 Postdoctoral Associate in Mathematics, Carnegie Mellon University 2001 Ph.D. in Finance, Université Paris 1 and Essec 1998 M.Sc. in Economics and Finance, Université Paris 1 1996 B.A. in Economics and Finance, Université Paris 1

Research interest

Julien Hugonnier has research interests in the areas of asset pricing, asset allocation, general equilibrium theory, mathematical finance and probability theory. His most recent research examines the impact of portfolio constraints on equilibrium prices, the effect of search frictions on corporate policy choices and the relations between financial and health-related choices. His research has been published in a variety of top tier academic journals including The Review of Economic Studies, Econometrica, The Journal of Financial Economics, Mathematical Finance and The Annals of Applied Probability. He is a member of the board of various journals including Mathematical Finance and Mathematics & Financial Economics and serves as the head the Master in Financial Engineering at EPFL.

Key words

Asset pricing under frictions, general equilibrium, search theory, mathematical finance, probability theory, decisions under uncertainty.

Current PhD students

• Julien Cujean • Giuliano Curatola • Michael Hasler

68 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Publications

• Health and (Other) Assets Holdings, J. Hugonnier, F. Pelgrin, and P. Saint Amour, Review of Economic Studies, forthcoming. • Incomplete Information, Idiosyncratic Volatility and Stock Returns, J. Hugonnier, and T. Berrada, Journal of Banking and Finance, forthcoming. • Rational Asset Pricing Bubbles and Portfolio Constraints, J. Hugonnier, Journal of Economic Theory, 2012, forthcoming. • Endogenous Completeness of Diffusion Driven Equilibrium Markets, J. Hugonnier, S. Malamud, and E. Trubowitz, Econometrica, vol. 80(3), pp. 1249-1270, 2012. • Mutual Fund Competition in the Presence of Dynamics Flows, M. Breton, J. Hugonnier, and T. Masmoudi, Automatica, vol. 46(7), pp. 1176-1185, 2010. • Mutual Fund Portfolio Choice in the Presence of Dynamic Flows, J. Hugonnier and R. Kaniel, Mathematical Finance, vol. 20(2), pp. 187–227, 2010. • Pricing and Hedging in the Presence of Extraneous Risks, P. Collin-Dufresne, and J. Hugonnier, Stochastic Processes and their Applications, 117(6), pp 742-765, 2007. • Corporate Control and Real Investment in Incomplete Markets, J. Hugonnier and E. Morellec, Journal of Economic Dynamics and Control, vol. 31(5), pp 1781-1800, 2007. • Heterogenous Preferences and Equilibrium Trading Volume. T. Berrada, J. Hugonnier, and M. Rindisbacher, Journal of Financial Economics, vol. 83(3), pp. 719–750, 2007.

Book chapters and books

Real Options and Risk Aversion, J. Hugonnier and E. Morellec. In: A. Bensoussan et al. (eds.), Ambiguity, Real Options, Credit Risk and Insurance, IOS Press, 2012.

Former PhD students

Rodolfo Prieto, Essays on Equilibrium Asset Pricing, EPFL, 2010. First placement: Boston University (Assistant Professor)

Awards

09/2012 Swiss Finance Institute Senior Chair 2007–2012 Swiss Finance Institute Junior Chair 2009–2010 Meritorious Service Award, Operations research

Invited talks (selected examples)

2012 Toulouse School of Economics 2012 Oxford Man Institute 2010 Bachelier seminar (IHP Paris) 2008 MFI Oberwolfach “Stochastic analysis in Finance and Insurance” 2008 ETH Zurich

A cTIVITy report 2007 - 2012 69 Grants

2009 – 2013 NCCR FINRISK (Swiss National Science Foundation) Project title: Dynamic Asset Pricing (Co-Principal Investigator) Budget: CHF 600’000

Teaching activities

EPFL • derivatives (MFE, 2009 – present) • Dynamic asset pricing (SFI PhD Program in Finance) 2009 – present • Fixed income and credit risk (MFE, 2009)

Professional services and activities

Editorial positions • Associate editor for Mathematical Finance • Associate editor for Mathematics and Financial Economics • Associate editor for Operations Research (2008-2011)

External examiner in PhD committees (since 2008) • Goradz Brumen, University of Zurich, 2009 • Alexey Medvedev, University of Geneva, 2008 • Emilio Osombela, University of Lausanne, 2008

EPFL • Head of the Financial Engineering section (MFE), 2009 – present • Steering committee, Master in Financial Engineering, 2009 – present • Teaching committee, Master in Financial Engineering, 2009 – present • Member of the Commission des Directeurs de Section, 2009 – present

Referee Econometrica, Review of Economic Studies, Journal of Finance, Review of Financial Studies, Review of Finance, Journal of Economic Theory, Journal of Financial Intermediation, Mathematical Finance, Operations Research, Annals of Applied Probability, Annals of Finance, Finance and Stochastics, Mathematics of Operations Research, Journal of Economic Dynamics and Control, Quantitative Finance, Finance Research Letters

70 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 A cTIVITy report 2007 - 2012 71 Present position Full Professor, Luisa Professor of International Finance Address École polytechnique fédérale de Lausanne Lambertini Swiss Finance Institute at EPFL Odyssea, Office 2 05 CH-1015 Lausanne Phone +41 (0)21 693 00 50 Email [email protected]

Degrees and employment history

2009 – present Pr ofessor of International Finance, EPFL 2007 – 2008 Associate Professor of International Finance, EPFL 2006 – 2007 Associate Professor, Department of Economics, Claremont McKenna College 2003 – 2006 Associate Professor, Department of Economics, Boston College 1995 – 2003 Assistant Professor, Department of Economics, University of California at Los Angeles 1995 Ph.D. in Economics, University of California at Berkeley 1989 M.A. in Economics, University of Warwick 1987 Laurea cum Laude in Economics, Universita' degli Studi di Bologna

Research interests

My research interests focus on modeling financial frictions in dynamic stochastic general equilibrium (DSGE) models and analyzing their consequences on macroeconomic variables and implications for policymaking. I am currently introducing endogenous default on mortgages, heterogeneous (prime versus subprime) borrowers, and alternative mortgage products in a model with housing to analyze an increase in subprime lending and evaluate alternative policy responses. In another project I am introducing financial intermediaries with a portfolio choice (between equity and deposits) in a DSGE model to study the macroeconomic consequences of bank capital requirements along the lines of Basel III. I am working on the interaction between monetary and fiscal policies, an area of research I have already contributed to with my earlier work. My current focus is on the interaction between a committed central bank and a discretionary fiscal policymaker when taxes are distortionary. On the empirical side, I am studying fiscal adjustments in U.S. States to evaluate the output effect of fiscal consolidations in monetary unions.

Keywords

Financial frictions, housing market, monetary and fiscal policy, macroeconomics, exchange rate, international finance.

72 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Current postdocs

• Dr. Chiara Forlati • Dr. Punnoose Jacob • Dr. Pinar Uysal

Current PhD students

• Abhik Mukherjee • Victoria Nuguer

Publications

Risky Mortgages in a DSGE Model, F. Chiara and L. Lambertini, International Journal of Central Banking, vol. 7(1), pp. 285 – 335, 2011.

Former PhD students

• Laura Alfaro (Supervisor), UCLA. First placement: Harvard Business School. • Mariano Pando (Supervisor), UCLA. First placement: Key Point Consulting. • Fernanda Llussa (Supervisor), UCLA. First placement: Universidade Nova de Lisboa. • Fabio Kanczuck (Co-supervisor), UCLA. First placement: Universidade de São Paulo. • Rajesh Singh (Co-supervisor), UCLA. First placement: University of Iowa. • Andrea Raffo (Co-supervisor), UCLA. First placement: Federal Reserve Bank of Kansas. • Albert Lee (Co-supervisor), UCLA. First placement: KMPG Peat Marwick. • Jaihyun Nahm (Co-supervisor), UCLA. First placement: Kookmin University. • Kyongchul Kim (Co-supervisor), UCLA. First placement: Analytic Investors. • Ari Aisen (Co-supervisor), UCLA. First placement: International Monetary Fund. • James Dixon (Co-supervisor), UCLA. First placement: University of Ottawa. • Giovanni Veronese (Co-supervisor), UCLA. First placement: Bank of Italy. • Sabina Pogorelec (Co-supervisor), Boston College. First placement: European Central Bank. • Tatiana Mihailovschi-Muntean (Co-supervisor), Boston College. First placement: Trent University. • Emmanuel Lartey (Co-supervisor), Boston College. First placement: California State University, Fullerton. • Yoto Yotov (Co-supervisor), Boston College.

A cTIVITy report 2007 - 2012 73 Invited talks (selected examples)

2012 European Economic Association, Malaga, Spain 2012 Financial and Macroeconomic Stability: Challenges Ahead, Istanbul, Turkey 2012 Infiniti Conference on International Finance, Trinity College Dublin, Ireland 2012 Canadian Economic Association Conference, Calgary, Canada 2011 10th Workshop on Macroeconomic Dynamics, University of Bologna, Italy 2011 Rethinking Economic Policies in a Landscape of Heterogeneous Agents conference, Catholic University, Milan, Italy 2011 The Interaction between Monetary Policy and Financial Stability, Norges Bank, Oslo, Norway 2010 Bank of Italy and Bank of France Conference on The Future of Monetary Policy, Ente Einaudi 2010 SNB Research Conference on Monetary Policy after the Financial Crisis, Swiss National Bank 2010 IJCB Conference on Monetary Policy Lessons from the Global Crisis, the Bank of Japan 2010 Monetary and Fiscal Policy for Macroeconomic Stability, University of Pavia 2010 Workshop on Heterogeneous Nations and Globalized Financial Markets, Central Bank of Poland

Grants

2011 – 2014 Sinergia (Swiss National Science Foundation) Project title: The Macroeconomics of Financial Crises Total budget: CHF 1’200’000

2006 – 2007 The Lowe Institute of Political Economy Research Grant Total budget: USD 30’000

Teaching activities

EPFL • Global business environment (MFE & MTE, 4 ECTS) • Macro-finance (MFE, 6 ECTS)

74 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Professional services and activities

EPFL • EPFL Library Committee, CDM representative, 2008 – present • Search Committee for Professor of Public Finance and Social Security Economics (ETHZ), 2012 • Search Committee for Professor of Macroeconomics (UNIL), 2010, 2011, 2012 • CDM Director Search Committee, 2008 – 2011 • Search Committee for Professor of Finance (EPFL), 2008 – 2009 • Search Committee for Professor of Financial Systems (ETHZ), 2010 • Steering Committee, Master in Financial Engineering, 2007 – 2009

External examiner in PhD committees (since 2008) • Benjamin Jonen, University of Zurich, 2012 • Maja Ganarin, University of Lausanne, 2012

Editorial positions Associate Editor, The B.E. Journal of Macroeconomics, 2012 – present

Consulting positions Consultant for the Fiscal Policies Division, European Central Bank, 2005 – 2007

Program committees • European Economic Association 2012 Meeting • Infiniti Conference on International Finance, 2012

Italian Ministry of Research, University and Education (MIUR) Research Guarantor responsible for allocating national research funds for Economics, Finance, Management and Statistics, 2010 – 2011

Referee American Economic Review, Quarterly Journal of Economics, Review of Economic Studies, Journal of Political Economy, Journal of International Economics, Journal of Monetary Economics, Economic Theory, European Economic Review, The Journal of the European Economic Association

Others Member of the Global Agenda Council on Fiscal Crises, World Economic Forum, 2010 – present

A cTIVITy report 2007 - 2012 75 Present position Assistant Professor (tenure track), Semyon Professor of Finance Address École polytechnique fédérale de Lausanne Malamud Swiss Finance Institute at EPFL Quartier UNIL-Dorigny, Extranef 213 CH-1015 Lausanne Phone +41 (0)21 693 01 37 Email [email protected]

Degrees and employment history

2009 – present Professor of Finance (Tenure Track Assistant Professor), EPFL 2009 Visiting Assistant Professor, McCombs School of Business, University of Texas, Austin (Jan 2009 – Jun 2009) 2007 – 2009 Assistant Professor of Quantitative Risk Management, ETH Zurich 2006 – 2007 Postdoctoral Researcher, ETH Zurich (Nov 2006 – Jul 2007) Quantitative Analyst, Alinpa AG, Wollerau (Aug 2006 – Oct 2006) 2006 Ph.D. in Mathematics, ETH Zurich 2001 Diploma in Mathematics, Donetsk National University, Donetsk, Ukraine

Research interest

Semyon Malamud has research interest in financial economics, both in asset pricing and in corporate finance. His research papers have addressed important questions is different areas of financial economics. He has published papers on such diverse topics as equilibrium asset pricing, optimal security design, asymmetric information and over-the-counter markets. Most of these papers have been published in the leading academic journals such as Econometrica, Journal of Financial Economics and Journal of Economic Theory.

Keywords

Equilibrium asset pricing, market microstructure, asymmetric information, optimal contracting and security design, market imperfections and liquidity, dynamic capital structure, game theory.

Current PhD students

• Evgeny Petrov • Rémy Praz

76 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Publications

Publications in financial economics • Optimal Incentives and Securitization of Defaultable Assets, S. Malamud, H. Rui, and A.B. Whinston, Journal of Financial Economics, forthcoming. • Endogenous Completeness of Diffusion Driven Equilibrium Markets, J. Hugonnier, S. Malamud, and E. Trubowitz, Econometrica, vol. 80(3), pp. 1249-1270, 2012. • Financial Markets Equilibrium with Heterogenous Agents, J. Cvitanic, E. Jouini, S. Malamud, and C. Napp, Review of Finance, vol. 16(1), pp. 285-321, 2012. • Price Impact and Portfolio Impact, J. Cvitanic and S. Malamud, Journal of Financial Economics, vol. 100(1), pp. 201-225, 2011. • The Relative Contributions of Private Information Sharing and Public Information Releases to Information Aggregation, D. Duffie, S. Malamud, and G. Manso, Journal of Economic Theory, vol. 145(4), pp. 1574-1601, 2010. • Information Percolation with Equilibrium Search Dynamics, D. Duffie, S. Malamud and G. Manso, Econometrica, vol. 77(5), pp. 1513-1574, 2009.

Publications in mathematical finance • Convexity Bounds for BSDE Solutions, with Applications to Indifference Valuation, C. Frei, S. Malamud, and M. Schweizer, Probability Theory and Related Fields, vol. 150(1-2), pp. 219-255, 2011. • Relative Extinction of Heterogenous Agents, J. Cvitanic, and S. Malamud, B. E. Journal of Theoretical Economics, vol. 10(1), art. 4, 2010. • Market Consistent Pricing of Insurance Products, S. Malamud, E. Trubowitz, and Mario Wüthrich, Astin Bulletin, vol. 38(2), pp. 483-526, 2008. • Universal Bounds for Asset Prices in Heterogenous Economies, S. Malamud, Finance and Stochastics, vol. 12(3), pp. 411-422, 2008. • Long Run Forward Rates and Long Yields of Bonds and Options in Heterogenous Equilibria, S. Malamud, Finance and Stochastics, vol. 12(2), pp. 245-264, 2008. • The Structure of Optimal Consumption Streams in General Incomplete Markets, S. Malamud and E. Trubowitz, Mathematics and Financial Economics, vol. 1, pp. 129-161, 2007.

A cTIVITy report 2007 - 2012 77 Former PhD students

Roman Muraviev, Utility Maximization with Habit Formation, ETH Zurich, 2012. First placement: Twelve Capital (Associate).

Awards

2010 – present Swiss Finance Institute Junior Chair

Invited talks (selected examples)

2012 Risk Management and Financial Markets, Toulouse School of Economics 2012 European Finance Association, Copenhagen 2012 IDC Herzliya, Israel, July 2012. Summer Conference and Invited research visitor 2012 Western Finance Association, Las Vegas 2012 European Winter Finance Conference, Davos 2011 American Economic Association Meeting, Denver, Colorado 2010 Tel Aviv Finance Conference, Tel Aviv, Israel 2010 World Congress of the Econometric Society, Shanghai

Grants

2009 – 2013 NCCR FINRISK (Swiss National Science Foundation) Project title: Dynamic Asset Pricing (Co-Principal Investigator) Budget: CHF 600’000

2009 – 2013 NCCR FINRISK (Swiss National Science Foundation) Project title: Mathematical Methods in Financial Risk Management (Co-Principal Investigator) Budget: CHF 600’000

2008 – 2010 ProDoc (Swiss National Science Foundation) Project title: Utility Maximization in Incomplete Markets (Co-Principal Investigator) Budget: CHF 200'000

78 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Teaching activities

EPFL • Derivatives (MFE, 4 ECTS, 2010) • Stochastic Calculus (MFE, 4 ECTS, 2010 – present) • Mathematics for Financial Economics (PhD Program in Finance, 4 ECTS, 2009 – present)

Others Summer school: Dynamic Capital Structure Models, Dublin City University (2012)

Professional services and activities

• Co-editor, Mathematics and Financial Economics • Member of derivatives workgroup, Swiss Federal Social Security Funds • Member of the Program Committee, The Rothschild Caesarea Center Annual Conference • Organizer of a joint UNIL-EPFL reading group “Macroeconomics with Financial Frictions” • Member of the UNIL recruiting committee • Member of Ph.D. committee for Daniel Andrei (University of Lausanne), Elyse Payzan-LeNestour (EPFL), Rodolfo Prieto (EPFL), Huaxia Rui (McCombs School of Business), Pierre Ruther (Univerité Paris-Dauphine) • Ad-hoc referee for American Economic Review, B.E. Journal of Theoretical Economics, Econometrica, Finance and Stochastics, Journal of Economic Theory, Journal of Finance, Journal of Mathematical Economics, Mathematical Finance, Review of Economic Studies, Review of Finance

A cTIVITy report 2007 - 2012 79 Present position Assistant Professor (tenure track), Loriano Professor of Finance Address École polytechnique fédérale de Lausanne Mancini Swiss Finance Institute at EPFL Quartier UNIL-Dorigny, Extranef 217 CH-1015 Lausanne Phone +41 (0)21 693 01 07 Email [email protected]

Degrees and employment history

2009 – present Professor of Finance (Tenure Track Assistant Professor), EPFL 2007 – 2009 Assistant Professor of Finance, Swiss Banking Institute, University of Zurich 2005 – 2007 Senior Researcher, Swiss Banking Institute, University of Zurich 2004 – 2005 Research Fellow, Operations Research and Financial Engineering department, Princeton University 2004 Ph.D. in Economics, University of Lugano 1999 M.A. in Economics (cum laude), University of Perugia, Italy

Research interest

Loriano Mancini has research interest in financial econometrics, both in theoretical and empirical aspects. His research papers have investigated various relevant issues, such as liquidity in the foreign exchange markets; term structure dynamics of variance, equity and jump risk premiums; optimal allocations using variance swap contracts; impact of sentiment, optimism and overconfidence on asset prices; connection between liquidity and systemic risk. His research has appeared in leading finance and econometric journals, such as the Journal of Finance, Review of Financial Studies, Journal of the American Statistical Association, and Journal of Econometrics.

Keywords

Liquidity, volatility, sentiment, systemic risk.

Current PhD students

Emmanuel Leclercq

80 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Publications

• Liquidity in the Foreign Exchange Market: Measurement, Commonality, and Risk Premiums, L. Mancini, A. Ranaldo, and J. Wrampelmeyer, Journal of Finance, forthcoming. • Robust Value at Risk Prediction, L. Mancini and F. Trojani, Journal of Financial Econometrics, vol. 9(2), pp. 281-313, 2011. • Option Pricing With Model-Guided Nonparametric Methods, J. Fan and L. Mancini, Journal of the American Statistical Association, vol. 104(488), pp. 1351-1372, 2009. • Out of Sample Forecasts of Quadratic Variation, Y. Ait-Sahalia and L. Mancini, Journal of Econometrics, vol. 147(1), pp. 17-33, 2008. • A GARCH Option Pricing Model with Filtered Historical Simulation, G. Barone-Adesi, R.F. Engle, and L. Mancini, Review of Financial Studies, vol. 21(3), pp. 1223-1258, 2008.

Book chapters and books

• Systemic Risk and Sentiment, G. Barone-Adesi, L. Mancini, and H. Shefrin. In: J.-P. Fouque and J. Langsam (eds.), Handbook on Systemic Risk, Cambridge University Press, forthcoming • Recent Developments in the Forecast of Quadratic Variation, L. Mancini. In: Complex Models and Computational Methods for Estimation and Prediction, S. Co. 2007, Università Ca' Foscari, Venice, 2007

Former PhD students

• Jan Wrampelmeyer, Ambiguity, Illiquidity, and Hedge Funds: An Analysis of Recent Developments and Current Research Topics in Post-Crisis Financial Markets, University of Zurich, 2011. First placement 2011: University of St. Gallen (Assistant Professor) • Mustafa Karaman, Essays in Econometrics of Financial Asset Pricing Models, University of Zurich, 2012. First placement: Visiting scholar at the Stern School of Business (in the group of Prof. Robert Engle), New York University

Awards

2012 Swiss Finance Institute Junior Chair

Invited talks (selected examples)

2012 First Financial Econometrics Workshop, Zurich, Switzerland 2011 Princeton-Lausanne Workshop, Lausanne, Switzerland 2011 Seminar at Tinbergen Institute, Amsterdam, Netherlands 2010 Swiss Finance Institute 5th Annual Meetings, Zurich, Switzerland 2010 ICORS, Prague, Czech Republic 2010 Statistic and Finance, Evry, France

A cTIVITy report 2007 - 2012 81 Grants

2009 – 2013 NCCR FINRISK (Swiss National Science Foundation) Project title: Dynamic Asset Pricing (Co-Principal Investigator) Budget: CHF 600’000

2008 – 2011 ProDoc (Swiss National Science Foundation) Project title: Financial Econometrics (jointly with Marc Paolella, University of Zurich) Budget: CHF 309'450

2007 – 2009 Swiss National Science Foundation Project title: Nonparametric Model Risk Detection (jointly with Rajna Gibson, University of Geneva) Budget: CHF 120'000

Teaching activities

EPFL Econometrics (MFE, 6 ECTS) Advanced topics in financial econometrics (MFE, 4 ECTS)

Professional services and activities

EPFL PhD thesis committee at EPFL (Anjali Nursimulu) Steering committee MFE Supervision of eleven MFE master thesis projects (2009 – 2012) Institute representative in the CDM IT & Communication Committee

University of Zurich PhD thesis committee at University of Zurich (Matteo Bonato, Remo Crameri) Coordinator of the “Quantitative Finance” project in the framework of the university research priority program “Finance and Financial Markets” (2007-2009)

Referee Journal of Finance, Journal of the American Statistical Association, Finance and Stochastics, Journal of Econometrics, Journal of Financial Econometrics, Journal of Economic Dynamics and Control, Finance Research Letters, Journal of Empirical Finance, International Journal of Theoretical and Applied Finance, Review of Finance, Econometrics Journal, Journal of Business and Economic Statistics, Journal of Futures Markets, European Journal of Finance, Empirical Economics, Finance, Journal of Risk, Journal of Risk and Insurance, Computational Statistics and Data Analysis, Mathematics and Financial Economics, Springer

82 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 A cTIVITy report 2007 - 2012 83 Present position Full Professor, Professor of Finance Erwan Address École polytechnique fédérale de Lausanne Swiss Finance Institute at EPFL Morellec Quartier UNIL-Dorigny, Extranef 210 CH-1015 Lausanne Phone +41 (0)21 693 01 16 Email [email protected]

Degrees and employment history

2008 – present Professor of Finance, EPFL 2003 – 2008 Professor of Finance, University of Lausanne (UNIL) 1999 – 2003 Assistant Professor of Finance, William E. Simon Graduate School of Business Administration, University of Rochester, New York 1996 – 1999 Lecturer, HEC Paris; EDHEC Nice; ESA Beirut 1999 Ph.D. in Finance, Summa Cum Laude, HEC Paris 1994 M.A. in Finance, Sorbonne University

Research interest

Erwan Morellec has research interest in corporate finance and asset pricing. His research papers have addressed central questions in corporate finance – such as the effects of corporate governance, of bankruptcy procedures, or of economic conditions on corporate investment, financing, and risk management decisions – within consistent frameworks for multi-period valuation. As such, his papers have contributed to unify asset pricing theory with corporate finance and characterized the effects of the macroeconomic environment of the legal environment on economic growth and default risk, and ultimately on welfare. He has contributed to both the theoretical and the empirical literature and has published extensively in the leading academic journals in finance, such as the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies.

Keywords

Corporate finance, corporate governance, risk management, liquidity management, investment decisions under uncertainty, financing decisions.

Current PhD students

• Stefano Colonnello • Hoang Ngoc Giang • Yalda Sigrist • Francesca Zucchi

84 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Publications

• Corporate Governance and Capital Structure Dynamics, E. Morellec, B. Nikolov, and N. Schürhoff, Journal of Finance, vol. 67, pp. 803-848, 2012. (Lead article). • Corporate Investment and Financing under Asymmetric Information, E. Morellec and N. Schürhoff, Journal of Financial Economics, vol. 99, pp. 262–288, 2011. • Dynamic Investment and Financing under Personal Taxation, E. Morellec and N. Schürhoff, Review of Financial Studies, vol. 23(1), pp. 101-146, 2010. • Financing and Takeovers, E. Morellec and A. Zhdanov, Journal of Financial Economics, vol. 87, pp. 556-581, 2008. • Stock Returns in Mergers and Acquisitions, D. Hackbarth and E. Morellec, Journal of Finance, vol. 63(3), pp 1213-1252, 2008. (Barclays Global Investors Award - Runner-up prize, European Finance Association, 2006). • Closed-Form Solutions to Stochastic Process Switching Problems, P. François and E. Morellec, Journal of Mathematical Economics, vol. 44(11), pp. 1072-1083, 2008. • Agency Conflicts and Risk Management, E. Morellec and C.W. Smith Jr., Review of Finance, vol. 11(1), pp. 1-23, 2007. (Lead article). • Corporate Control and Real Investment in Incomplete Markets, J. Hugonnier and E. Morellec, Journal of Economic Dynamics and Control, vol. 31(5), pp. 1781-1800, 2007.

Book chapters and books

Real Options and Risk Aversion, J. Hugonnier and E. Morellec. In: A. Bensoussan et al. (eds.), Ambiguity, Real Options, Credit Risk and Insurance, IOS Press, 2012

Former PhD students

• Jan Peter Kulak (Co-Supervisor), Essays in Financial Economics, EPFL, 2012. On the job market • Philip Valta (Supervisor), Corporate Finance, Asset Returns, and Credit Risk, EPFL, 2010. First placement: HEC Paris (Assistant Professor) • Maria Cecilia Bustamante (Supervisor), Three Essays in Corporate Finance, University of Lausanne, 2009. First placement: London School of Economics (Lecturer) • Boris Nikolov (Supervisor), Three Essays in Dynamic Corporate Finance, University of Lausanne, 2008. First placement: University of Rochester (Assistant Professor) • Jijun Niu (Supervisor), Three Essays in Banking, University of Lausanne, 2007. First placement: Simon Fraser University (Assistant Professor)

A cTIVITy report 2007 - 2012 85 Awards

2009 – present Research Fellow, Center for Economic Policy Research (CEPR), UK 2008 Invited speaker, conference on “Corporate Governance” Fundación Ramón Areces, Madrid, Spain 2007 Keynote speaker, European Institute for Advanced Studies in Management conference on Default Risk and Financial Distress, University of Rennes, France 2006 – present Swiss Finance Institute Senior Chair 2006 Barclays Global Investors Award (Runner-up prize, with Dirk Hackbarth) for best conference paper at the 2006 European Finance Association meeting

Invited talks (selected examples)

2008 – 2012 “Financing investment: The choice between public and private debt”: HEC Montreal, McGill Desautels School of Management, University of Konstanz, University of Lancaster “Capital supply uncertainy, cash holdings and investment”: Boston University, Collegio Carlo Alberto, London Business School, London School of Economics, MIT Sloan, Sabanci University, University of Bern, University of Bologna, University of Rochester “Corporate governance and capital structure dynamics”: EPFL, Fondacion Ramon Aceres Madrid, University of Rennes, University of Rochester “Stock returns in mergers and acquisitions”: NHH Norwegian School of Business Administration and Economics, University of Vienna, University of Zurich

Grants

2009 – 2013 NCCR FINRISK (Swiss National Science Foundation) Project title: Dynamic Corporate Finance: Theory and Tests Budget: CHF 1’100'000

2005 – 2008 NCCR FINRISK (Swiss National Science Foundation) Project title: Dynamic Corporate Finance Budget: CHF 760'000

Teaching activities

EPFL (2008 – present) • Principles of finance (MTE, 2010 – present) • Real options and financial structuring (MFE, 2009 – present) • Introduction to finance (MFE, 2008 – 2009) • Cases in finance (MFE, 2009 – 2010) • Corporate finance (PhD Program in Finance, 2008 – present)

Swiss National Bank (2003 – present) Instruments of financial markets (Study Center Gerzensee)

Executive education in Switzerland (2003 – 2010) • Credit risk (International Center FAME) • Derivative instruments and financial engineering (Swiss Banking School)

86 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Professional services and activities

Swiss National Science Foundation, Switzerland • Project director for NCCR FINRISK, Corporate Finance and Financial Innovation, 2005 – 2009 • Project director for NCCR FINRISK, Dynamic Corporate Finance: Theory and Tests, 2009 – 2013 • Coordinator for doctoral education for NCCR FINRISK, 2005 – 2013

EPFL • Head of SF@EPFL, 2008 – 2011 • Creation of SFI@EPFL, 2008 • Finance Recruiting Chair, 2009 – 2011 • Member of the Finance PhD committee at EPFL, 2008 – present • Steering committee, Master in Financial Engineering, 2008 – present • Teaching committee, Master in Financial Engineering, 2008 – present • Member of the commission de coordination UNIL-EPFL in finance, 2009 – present • Member of the CDM Academic Promotion Committee, 2008 – present • Member of the CDM Council, 2008 – 2010 • Member of the CDM Executive Committee, 2008 – 2010 • Head of the PhD program in finance at EPFL, 2008 – 2010 • Development of a PhD program in Finance, 2008 • Director of Master in Financial Engineering, 2008 – 2009 • Member of the recruiting commission in Finance, 2008 – 2009 • Member of the University-wide doctoral commission, 2008 – 2010

Swiss Finance Institute, Switzerland • Head of the nation-wide doctoral program, 2006 – present • Member of the committee for the outstanding research paper prize, 2006 – present • Head of the Léman center (Universities of Geneva and Lausanne and EPFL), 2009 – present

External examiner in PhD committees (since 2008) • Laurent Frésard, University of Neuchatel, 2008 • Zhihua Chen, University of Lausanne, 2009 • Jürg Burkhard, University of Lausanne, 2010 • Stefano Sacchetto, London Business School, 2010 • Natalia Guseva, University of Lausanne, 2011 • Ramona Westermann, University of Geneva, 2012

Editorial positions Associate editor Review of Corporate Finance Studies, 2010 – present

A cTIVITy report 2007 - 2012 87 Reviewer • National Science Foundation (USA); Hong Kong Research Grants • Council; Social Sciences and Humanities Research Council (Canada); Research Foundation Flanders (Belgium); Research Promotion Foundation of Cyprus; Swiss National Science Foundation

Program committee • American Finance Association meetings; European Finance • Association meetings; French Finance Association meetings; Western Finance Association meetings; Paris Spring Corporate Finance Conference; SFS Finance Cavalcade Festival

Discussant • American Finance Association; European Finance Association; French Finance Association; • Western Finance Association; Paris Spring Corporate Finance Conference

Referee American Economic Review; Annals of Operations Research; Economic Theory; International Economic Review; Journal of Accounting and Economics; Journal of Banking and Finance; Journal of Economic Dynamics and Control; Journal of Economic Theory; Journal of Finance; Journal of Financial Economics; Journal of Financial Intermediation; Journal of Financial and Quantitative Analysis; Journal of International Money and Finance; Journal of Monetary Economics; Journal of Money, Credit, and Banking; Journal of Political Economy; Management Science; Rand Journal of Economics; Review of Economic Dynamics; Review of Economic Studies; Review of Finance; Review of Financial Studies

88 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 A cTIVITy report 2007 - 2012 89 Present position Assistant Professor (tenure track), Anders Professor of Finance Address École polytechnique fédérale de Lausanne Trolle Swiss Finance Institute at EPFL Quartier UNIL-Dorigny, Extranef 216 CH-1015 Lausanne Phone +41 (0)21 693 01 31 Email [email protected]

Degrees and employment history

2009 – present Professor of Finance (Tenure Track Assistant Professor), EPFL 2007 – 2009 Postdoctoral fellow, Copenhagen Business School 2007 Ph.D. in Finance, Copenhagen Business School 2005 – 2006 Visiting graduate student, UCLA Anderson School of Management 2001 M.S. in Economics (cand. polit.), University of Copenhagen

Research interest

My research focuses on the pricing, hedging, and risk-management of derivatives. Specifically, in a series of papers I show that interest rate and commodity derivatives are driven by risk factors that cannot be hedged by trading in the underlying assets. I also show that market participants require significant compensation for exposure to these risk factors. More recently, I have studied how to infer interbank risk from traded interest rate derivatives and how to decompose interbank risk into counterparty and liquidity risk. I am currently engaged in research on the extent to which liquidity risk affects the pricing of credit derivatives, and on the impact of repo market liquidity on the pricing of European sovereign bonds.

Keywords

Derivatives, term structure of interest rates, commodities, interbank risk, liquidity risk.

Current PhD students

• Benjamin Junge • Ilya Kolpakov

Publications

• The Term Structure of Interbank Risk, D. Filipovic and A. Trolle, Journal of Financial Economics, forthcoming. • Variance Risk Premia in Energy Commodities, A.B. Trolle and E.S. Schwartz, Journal of Derivatives, vol. 17(3), pp. 15-32, 2010.

90 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 • Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives, A.B. Trolle and E.S. Schwartz, Review of Financial Studies, vol. 22(11), pp. 4423-4461, 2009. • A General Stochastic Volatility Model for the Pricing of Interest Rate Derivatives, A.B. Trolle and E.S. Schwartz, Review of Financial Studies, vol. 22(5), pp. 2007-2057, 2009.

Book chapters and books

Pricing Expropriation Risk in Natural Resource Contracts – A Real Options Approach, E.S. Schwartz and A.B. Trolle. In: W. Hogan and F. Sturzenegger (eds.), The Natural Resource Trap, MIT Press, 2010

Awards

2009 – present Swiss Finance Institute Junior Chair

Invited talks (selected examples)

2012 Young Researchers Workshop on Finance, University of Tokyo 2009 Energy Finance Conference, Norway 2009 Madrid Finance Workshop, IE Business School

Grants

2013 – 2016 Swiss Finance Institute Research Grant Project title: CDS Market Liquidity Budget: CHF 240’000 2009 – 2013 NCCR FINRISK (Swiss National Science Foundation) Project title: Dynamic Asset Pricing (Co-Principal Investigator) Budget: CHF 600’000 2007 – 2009 danish Social Science Research Council Postdoctoral fellowship Budget: CHF 250’000 (approx.)

Teaching activities

EPFL • Advanced derivatives (MFE, 4 ECTS, 2009 – present) • Investments (MFE, 6 ECTS, 2011 – present)

Professional services and activities

EPFL • Organizer of the joint EPFL-UNIL finance seminar series, 2010 – 2012 (invitation and coordination of approximately 30 speakers per year) • Member of MFE admission committee, 2009 – present • Member of MFE teaching committee, 2011 – present • Member of PhD Program in Finance committee, 2009 – 2011

A cTIVITy report 2007 - 2012 91

PART C: Student and Alumni Surveys SWISS FINANCE INSTITUTE @ EPFL INTRODUCTION

This document compiles the results of an on- part contained questions to obtain information line survey conducted to obtain feedback from about their employment (if respondents were current and former students concerning the qua- alumni) or internship experience (if respondents lity of SFI@EPFL’s two teaching programs – the were students). Questions in part four focused Master in Financial Engineering (MFE) and the on participants' perceptions of the quality and Doctoral Program in Finance (EDFI). We were relevance of the training provided by SFI@EPFL’s also interested in acquiring information regar- teaching programs. ding the graduates’ employability and placement in the labor market. Invitations to participate in our online surveys were emailed to 87 current and former students To meet these objectives, we developed four with a response deadline of one month. Two slightly different questionnaires for our four tar- reminders were sent at two-week intervals to get groups: increase the response rate. We received a total of 51 replies (Table 1). The participation level was • Current MFE students highest among MFE alumni (85%) and lowest • MFE alumni among current MFE students (44%). Being a very • Current PhD students young program, the EDFI doctoral program com- • PhD alumni. prises only four alumni, two of whom filled out our questionnaire. We are aware that information All questionnaires consisted of four parts. gathered from such a small group is not signifi- While parts one and two were designed to cant and does not permit conclusions. However, gather basic information about the participants since we still consider it interesting information and their educational background, the third we decided to include it in the report.

Table 1: Survey response rate

Type Number Of which Number of Of which Response Of which of survey of persons male respondents male Rate male contacted MFE Students 50 41 22 17 44% 77% PhD Students 13 12 10 9 77% 90% MFE Alumni 20 17 17 14 85% 82% PhD Alumni 4 3 2 2 50% 100%

94 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 1 . PROFILE DATA

Given the high male-to-female ratio in our teaching Figure 1: Date of birth distribution of respondents programs, it is no surprise that the majority of respondents were male (Table 1, page 94). The birth 1988- 12 years of survey respondents ranged from 1974 to 1990 1980, with an average of 1985-1986 (Figure 1). The 1985- 12 7 5 “oldest” respondents were the two PhD alumni 1987 (1974 and 1979) and an MFE Alumnus (1978). 1980- 1984 3 5 Our two teaching programs attract students from all around the world (Figure 2). The stu- 1974- 1 2 dents and alumni who responded to our surveys 1979

represent 23 countries, with Switzerland (10 MFE Alumni respondents), Italy (7 respondents), China (6 res- MFE Students pondents) and France (5 respondents) the most PhD Alumni PhD Students strongly represented. Nations less represented were Brazil, Chile, Cyprus, Germany, Greece, Iran, Israel, Lebanon, Lithuania, Morocco, Romania, Russia, Salvador, Singapore, Thailand, Tunisia, Turkey, USA, or Vietnam.

Figure 2: Geographic origin of respondents

Student and Alumni Surveys 95 Educational background 2 . of respondents

According to our surveys, 15% of current MFE While on the whole the students and alumni students and around 30% of MFE alumni have a responding to our survey have quite diverse aca- Bachelor degree from EPFL, while 20% of current demic backgrounds, the majority of respondents EDFI students have a Master degree from EPFL. did studies in mathematics, finance or engi- The majority of respondents studied at other neering before enrolling in one of our teaching universities, usually in their native countries, programs, MFE or EDFI (Figure 4). This is no before enrolling in an SFI@EPFL teaching program surprise since both programs require a strong (Figure 3). In accordance with the strict admis- background in mathematics. sion guidelines and quality standards of our Master and PhD programs, they are all top-rated Six MFE alumni mention a background in educational institutions, among them Shanghai computer science and communication. Given that University of Finance and Economics, Supelec, programming and the development of financial Politecnico di Milano, Michigan State Univer- models seem to be an important job requirement sity, Pierre and Marie Curie University, Technion, (see Type of activities in part 3) in this particular Ecole Centrale Nantes, ETH Zurich, Bocconi, case a Bachelor degree in computer science is University of Lausanne, or University Paris 1 Pan- definitely an asset. théon-Sorbonne.

Figure 3: Respondents who earned an EPFL Bachelor degree (for MFE students and alumni) or EPFL Master degree (for PhD students and alumni)

80%

60% 17 11 8 2

40%

20% 5 3 2 0% MFE MFE PhD PhD Students Alumni Students Alumni Other EPFL

Figure 4: Background of respondents before enrolling in Master and PhD studies at SFI@EPFL

Various Engineering Programs Mathematics

Finance / Banking

Computer Science / Computer engineering

Physics

Business Administration / Management

Life Sciences & Technology

Economics

Statistical and Actuarial Sciences

0 2 4 6 8 10 12 14 16

PhD Students PhD Alumni MFE Students MFE Alumni

96 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Employment 3 . overview

The third part of this survey provides information We know however that some interns have concerning the professional situation of SFI@ chosen these fields, but they are probably among EPFL alumni and the internship placements of those who did not participate in the survey. One current students. We requested the following in- MFE alumnus created his/her own company. formation from survey participants:

• Whether they are employed or not Figure 5: Employer category • If employed, how long have they been in their current position 7 70% • What is the size and name of “their” company 60% and where is it located 50% • What is this company’s main area of activity 40% 4 • What is their main function and level of 3 30% 2 responsibility 2 20% 1 • What is their salary 10% 1 1 1 0 0 0 • How satisfied are they with their current job 0% Own Firm Bank Other Funds The responses are interesting in their raw form, Hedge Company Company Insurance but are even more relevant if we analyze, combine Consulting and compare job and internship situations. MFE Alumni MFE Interns

More than 60% of respondents report working Job location for a large company (Figure 6). Usually, young graduates or students see large companies as a Surprisingly, the majority of alumni or intern career booster due to their high reputation. Since respondents work in Switzerland, which for most the MFE program is still young, the compiled data of them is not their native country. Only two MFE presented in Figure 6 were totally expected and alumni respondents are working abroad (one in confirm this inclination. Lebanon and the other in Morocco). Since the SFI@EPFL alumni are still young, they might see Switzerland as a career booster at the beginning Figure 6: Employer size but choose to move abroad as soon as they gain experience and seniority. Both PhD alumni res- 80% 7 pondents are continuing their academic career 70% 10 60% abroad (one in France at HEC Paris and one in the 50% USA at Boston University School of Management). 40% 30% 3 2 20% 2 1 1 10% 0 Current employer 0% or internship placement Start-up SME (20-250 Large company Own or small employees) (>250 employees) company company Compiling current employer data for both alumni MFE Alumni MFE Interns (real positions) and students (internships) allows us to follow trends of professional choices from university to job market.

According to Figure 5, the majority of respondents opted for a job or internship in a bank or consulting firm. None of the intern respondents mention working in hedge funds or insurance companies.

Student and Alumni Surveys 97 Type of activities While all alumni declare themselves fairly or very satisfied with their current position, over Survey participants were also asked to indicate 80% of interns are satisfied with their internship the activities they perform in their current job (Figures 8 and 9), which, given the small sample or internship and could mark as many choices size, means in fact that only two persons declare as appropriate. Figure 7 gives an overview of the themselves unsatisfied. This is a very positive seven activities most related to the MFE program. result and we can therefore consider that the MFE at EPFL offers its graduates job opportuni- With the exception of corporate finance, the ties (or internships) that fulfill their expectations. activities proposed in the questionnaires were in fact the ones that respondents perform. 71% of the alumni respondents perform portfolio General usefulness of the diploma management activities. Alumni and intern respondents mention performing alternative invest- In the majority of cases (85% of MFE alumni and ment, risk management and control, product 100% of PhD respondents), their diploma was development and trading support activities. 21% required to obtain the position they currently of the alumni and 39% of the interns also mention occupy. Since the PhD alumni respondents are all performing academic research activities. assistant professors, it may be assumed that such a position requires a PhD. The other activities (Figure 7), concerning 23% of students and 29% of alumni, are mainly MFE alumni also often occupy strong techni- programming. Since several respondents hold a cal positions that correspond to a high level of Bachelor degree in computer science, they cer- education. tainly benefit from the computer skills acquired during their Bachelor alongside their financial techniques in the labor market.

98 SWISS FINANCE INSTITUTE – annual report 2012 Figure 7: Activities performed by alumni or interns

Portfolio management 10 3 5 Product development 5 MFE INTERNS 4 Risk management and control 3 FAIRLY SATISFIED, 2 NOT VERY SATISFIED, 2 2 Trading support 3 3 Academic research 5 17% 17% 2 Alternative investment 4 66% Corporate finance 0

Other 4 3

0% 10% 20% 30% 40% 50% 60% 70% 80%

MFE Alumni MFE Interns VERY SATISFIED, 8

Figure 8 and 9: Satisfaction with current internship or employment position

MFE INTERNS MFE ALUMNI

FAIRLY SATISFIED, 2 NOT VERY SATISFIED, 2 VERY SATISFIED, 6

17% 17% 43% 57% 66%

VERY SATISFIED, 8 FAIRLY SATISFIED, 8

Figure 10: Requirement to hold a Master (for MFE alumni) or a PhD degree (for PhD alumni) in their current job MFE ALUMNI YES 100% VERY SATISFIED,YES 6 80%

60%

40% 43% NO 20% NO 57% 0% MFE Alumni PhD Alumni

Student and Alumni Surveys 99

FAIRLY SATISFIED, 8

Current position We are pleased to see that the salary conditions of SFI@EPFL graduates for their first positions are While in 2009 an EPFL engineer took an aver- even better than those of the average EPFL engi- age of 2.8 months to get their first job and 91% of neer in 2009. Although we realize that comparing EPFL graduates found a job within a year (http:// 2009 and 2012 date is not totally accurate, since bachelor.epfl.ch/page-5908-en.html), more than salaries level have not significantly changed in 90% of MFE alumni respondents found a job in the last 3 years this provides us with useful in- less than 3 months, all of them found one within formation. less than 6 months after graduation and 65% got a job immediately after completing their EPFL studies (Figure 11). The MFE at EPFL clearly pro- Specificity of the PhD alumni vides its graduates with job opportunities, but we cannot distinguish whether this success is due Since only two PhD alumni responded to the to the internship impact (if companies convert survey, it is more appropriate to present their internships into real positions), the skills that answers directly instead of compiled data. Both students acquired through courses or the reputa- PhD alumni are pursuing an academic career, one tion of the program. The explanation probably lies at Boston University School of Management and the in a combination of all these factors. other at HEC Paris, where they perform academic research and teaching activities and are satisfied 71% of respondents earn a current gross with their current positions. One has a salary in annual salary in the range of CHF 60,000 – the range of CHF 150,000 – 199,999 and the other CHF 99,999, with 57% between CHF 80,000 and superior at CHF 200’000. They claim their doctoral 99,999. 7% of respondents get a salary of over studies at EPFL have prepared them well for their CHF 100,000 (Figure 12). While the average current positions, which, being academic, require salary of MFE alumni respondents is around a PhD degree. Placement of the PhD graduates CH82,000, the EPFL Career Center publishes sig- in the academic job market is really important for nificantly lower salaries in their 2009 study. For evaluating the reputation of a doctoral program. We a qualified engineer working in Switzerland, the are delighted to see that the PhD alumni have found average salary at hiring was CFH 75,175/year in strong academic positions in reputed institutions. the private and CHF 73,201/year in the public sector (http://bachelor.epfl.ch/page-5908-en.html).

Figure 11: Length of employment search after graduation Figure 12: MFE alumni current gross annual salary range

3 MONTHS 8 2 MONTHS 60% 1 MONTH 50% 6 MONTHS 40% 14% 7% 30% 7% 7% 3 20% 2 1 10% 0 65% 0

60,000 CHF 79,999 CHF 80,000 CHF 99,999 CHF 100,000 CHF 119,999 CHF < 60,000 CHF >120,000 CHF

0 MONTH

100 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Assessment of the SFI@EPFL 4 . Master and PhD programs

Master in Financial Engineering (MFE) or good (Figures 13 and 14). While all MFE alumni respondents declare themselves very satisfied or Since alumni and student responses are very satisfied with the level of expertise they acquired similar, we have often compiled them together to during their MFE studies (Figures 15 and 16), only obtain a larger sample for the purpose of analy- two students claim not to be satisfied and rate the sis. More than 90% of MFE alumni and students MFE as fair or poor. rate the quality of the MFE program as excellent

Figures 13 and 14: QualityMFE of STUDENTSthe MFE MFE ALUMNI

FAIR, 1MFE STUDENTSPOOR, 1 MFEEXCELLENT, ALUMNI 6

EXCELLENT, 8 AVERAGE, 1 FAIR, 1 POOR, 1 EXCELLENT, 6 5% 5% EXCELLENT, 8 AVERAGE, 1 38% 40% 6% 5% 5% 50% 38% 40% 6% 56% 50% 56%

GOOD, 10 GOOD, 9

Figures 15 and 16: Level of expertise in the field acquired during MFE studies

MFE STUDENTS MFE ALUMNI

NOT VERY NOT SATISFIED VERY SATISFIED,MFE 1 STUDENTSAT ALL, 1 MFE ALUMNISATISFIED, 7 SATISFIED, 5 NOT VERY NOT SATISFIED VERY SATISFIED, 1 AT ALL, 1 SATISFIED, 7 7% 7% SATISFIED, 5 47% 36% 7% 7% 50% 47% 36% 53% 50% 53%

VERY SATISFIED, 7 SATISFIED, 8

Student and Alumni Surveys 101 Considering that two persons is a very low number The questionnaires also asked students and (almost incompressible), we can conclude the alumni how they feel about the impact of their MFE@EPFL meets the expectations that students MFE studies on the development of designa- had before joining this program. 74% of alumni ted hard and soft skills. More than half of the and students would choose the MFE at EPFL if respondents are satisfied or very satisfied with they could start over (Figure 17). This question is the impact of the MFE education on these skills. very important in the framework of MFE assess- Surprisingly, although the MFE program curricu- ment and the outcomes are quite encouraging lum is mainly built on the development of hard and demonstrate the overall quality of the cur- skills, the percentage of satisfaction is on average riculum. However these results could probably quite similar for both sets of skills, soft and hard be improved slightly in the future to obtain more (Figures 19 and 20). than 80%. In addition, 96% of MFE interns and alumni respondents affirm that their MFE studies prepared them very well or adequately for their current positions (Figure 18). Thanks to the MFE, alumni seem confident of their ability to accom- plish their everyday work.

Figure 17: If they could start over, would MFE students Figure 18: How MFE studies prepare alumni or interns and alumni choose the MFE at EPFL? for their current position

MFE STUDENTS AND ALUMNI MFE STUDENTS AND ALUMNI

NOT SURE, 6 NO, 4 NOT AT ALL, 1

16% 10% 4% 48% 48% 74%

YES, 28 ADEQUATELY, 12 VERY WELL, 12

102 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 Figure 19: Student opinion regarding impact of their MFE studies on development of listed skills Figure 19

Hard skills Derivative pricing methods Quantitative methods Financial instruments Risk management methods Programming skills / Numerical methods Financial & managerial accounting Portfolio management techniques Knowledge of financial industry Soft skills Analytical thinking Sense of responsibility Self-confidence Working methods Teamwork aptitude and interpersonal skills Ability to develop arguments Leadership skills Planning and management skills Presentation and communication skills

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Very satisfied Satisfied Somewhat satisfied Not at all satisfied

Figure 20: Alumni opinion regarding impact of their MFE studies on development of listed skills Figure 20

Hard skills Quantitative methods Derivative pricing methods Financial instruments Risk management methods Financial & managerial accounting Portfolio management techniques Knowledge of financial industry Programming skills / Numerical methods Soft skills Analytical thinking Ability to develop arguments Sense of responsibility Teamwork aptitude and interpersonal skills Presentation and communication skills Self-confidence Working methods Leadership skills Planning and management skills

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Very satisfied Satisfied Somewhat satisfied Not at all satisfied

Student and Alumni Surveys 103 The MFE comprises three semesters of an internship student (Figure 23), indicating also coursework followed by a 25-week internship that respondents would like to retain a link with in a financial industry. MFE questionnaires ask their studies at EPFL. The SFI@EPFL should take whether respondents perceive this internship advantage of this desire on the part of alumni as useful. More than 95% find it useful or very by placing internship students or developing a useful to do an internship during the 4th semester strong alumni network. As mentioned earlier, of the MFE (Figures 21 and 22), confirming the respondents also express their confidence in the importance of maintaining internships in the high quality of the program and by accommodating curriculum. Internships allow students to put an MFE intern, they probably also expect to find a their knowledge into practice and are also a good young new talent for subsequent recruitment. way to develop professional skills and acquire job market search techniques. 79% of MFE students and alumni respondents are willing to supervise

Figures 21 and 22: Usefulness of MFE mandatory internship

MFE ALUMNI MFE STUDENTS MFE ALUMNI MFE STUDENTS

USEFUL, USEFUL, NOT VERY USEFUL, USEFUL, NOT VERY 1 1 USEFUL, 1 1 1 USEFUL, 1

6% 5% 5% 6% 5% 5%

94% 90% 94% 90%

VERY USEFUL, VERY USEFUL, VERY USEFUL, VERY USEFUL, 15 19 15 19

Figure 23: Willingness to supervise an internship student

MFE STUDENTS AND ALUMNI

NO, 8 21%

79% YES, 30

104 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 PHD PROGRAM relevant topics and helped with technical difficul- ties. Moreover, they appreciate the stimulating As for the MFE, the compiled outcomes of the PhD and insightful working environment, the inter- program assessment indicate the high quality of national exposure, and the level of expertise of the program. Since the number of PhD students faculty members. They also appreciate the excel- and alumni respondents is quite low, we have lent working and financing conditions. combined the results of both surveys. In answer to the question what do you like 83% of respondents rate PhD supervision as least about the PhD, some respondents report excellent and 17% as good. No respondents con- tensions between professors from different ins- sidered this supervision as average, fair or poor titutions, some find too much pressure during (Figure 24). In line with the MFE results, PhD stu- the first year and some would like to have more dents and alumni are all satisfied with the level of advanced courses in the second year. To improve expertise acquired during their PhD studies. This the quality of the PhD program curriculum, some factor is fundamental for their future academic respondents would place more emphasis on career since PhD studies teach students useful methodological courses in econometrics, micro methods and skills for subsequently producing and macroeconomics, others would increase the strong publications. number of advanced PhD courses, and some wish to do research sooner in the program. They would In addition to the quantitative results and also like to have a local faculty member with ex- due to the small number of PhD student and tensive expertise in mechanism design, game alumni respondents, it was interesting to also theory or contract theory. Increasing faculty size do a qualitative analysis. To do so, the PhD sur- in general is another recommendation. Most res- veys were designed with a large number of blank pondents see the fact that EDFI includes several fields in which respondents were invited to note universities as an advantage since it increases personal comments. During their PhD studies, visibility on the job market and offers more respondents mention being closely followed opportunities to share knowledge and research. by their supervisor, who made them aware of

Figure 24: Quality of PhD supervision Figure 25: Level of expertise acquired by students or alumni in their field during PhD studies

PhD STUDENTS AND ALUMNI PhD STUDENTS AND ALUMNI

GOOD, 2 EXCELLENT, 10 SATISFIED, 2 VERY SATISFIED, 10

17% 17% 83% 83%

Student and Alumni Surveys 105 While 92% of PhD students and alumni state 83% of PhD students and alumni report that in they would select the same doctoral program if their opinion an EPFL PhD degree is recognized they could start over, 0% would not and just one on the international job market in finance respondent is not sure of they would select it again (Figure 27). Although the PhD program is still (Figure 26). With only one person not sure about young, respondents are confident of its interna- selecting the EDFI again, we can consider that the tional reputation. SFI@EPFL professors contribute PhD program gives full satisfaction to the students. to this prestige by publishing in the top academic financial journals.

Figure 26: If they could start over, would PhD students Figure 27: Recognition of EPFL PhD on international job and alumni choose the same program? market in finance

PhD STUDENTS AND ALUMNI PhD STUDENTS AND ALUMNI

I DON'T KNOW, NOT SURE, 1 YES, 11 YES, 10 2

8% 17%

92% 83%

106 SWISS FINANCE INSTITUTE – ANNUAL REPORT 2012 CONCLUSIONS

The four online surveys carried out in June 2012 and soft skills. The MFE alumni survey indicates were successful in terms of participation with that they find a job within six months maximum an average response rate of 64%. Although this and have an average annual salary of CHF 82,000. rate is quite high, the overall number of respon- If we compare these results with those published dents (22 MFE students, 10 PhD students, 17 MFE by the EPFL Career Center, we are pleased to see alumni and 2 PhD alumni) is still low due to the that our students perform even better than the recent creation of the programs. average EPFL engineer when they enter the job market. However, analysis of the results has provided interesting and useful information to the SFI@ As expected, the results of the questionnaires EPFL in terms of student and alumni profiles, em- underline the diversity of SFI@EPFL students as ployment and program assessments. The most well as the variety of academic backgrounds that significant outcome lies in the high level of satis- enhance intellectual and cultural exchanges in all faction of respondents with all programs. Overall programs. more than 90% of respondents find their EPFL program either good or excellent, more than 86% Overall, according to the outcomes of these are satisfied with the level of expertise attained at questionnaires, the SFI@EPFL programs meet the end of their studies and more than 74% would or exceed student and alumni expectations. They choose the same program if they could start over. also seem well designed and appropriate to fill Respondents rate the quality of PhD supervision job market needs. In the future, the information as either excellent or good. derived from these questionnaires will allow us to develop a new strategy, better integrating student Regarding job placements, the survey results and alumni needs. We should in particular ana- demonstrate that SFI@EPFL programs rapidly lyze in detail the impact of MFE on student skills offer interesting job opportunities. More than 84% as we rethink the curriculum design. are satisfied with their position, 85% acknowledge that their education is highly relevant to the needs of the industry and that they develop both hard

Student and Alumni Surveys 107 Swiss Finance Institute @ EPFL Quartier UNIL – Dorigny Extranef 214 1015 Lausanne Switzerland +41 21 693 24 66 http://sfi.epfl.ch