cover AR-SFI-07 22.10.2008 11:29 Page 1

Activity Report 2007-2008

Geneva Zürich Bd. du Pont d'Arve 40 Walchestrasse 9 1211 Geneva 4 8006 Zurich Switzerland Switzerland

T +41 22 379 84 71 T +41 44 254 30 80 F +41 22 379 82 77 F +41 44 254 30 85 [email protected] [email protected] www.SwissFinanceInstitute.ch cover AR-SFI-07 22.10.2008 11:29 Page 2

Impressum

The Swiss Finance Institute Activity Report is published once a year. A publication of the Swiss Finance Institute.

Editor: Jean-Pierre Danthine. Contributors to this issue: Anita Belitz-Krasniqi, Tobe Freeman, Harry Hürzeler The Activity Report can be obtained free of charge from:

Swiss Finance Institute Bd. du Pont d'Arve 40 1211 Geneva 4 - Switzerland Tel +41(0)22 379 84 71 - Fax +41(0)22 379 82 77 www.SwissFinanceInstitute.ch - [email protected] Activity Report 2007-2008 s a world-leading financial center building on a rich history, Switzerland’s financial sector has A the natural ambition of housing a world-leading research and training center in banking and finance.

The Swiss Finance Institute is the product of this ambition. Established at the initiative of the Swiss Bankers Association, it is a private foundation created in January 2006 with the support of the Swiss banking and finance community and SWX together with the Swiss Confederation, the Swiss National Science Foundation and several Swiss universities with the aim of advancing research activities in finance and executive education in the banking and finance sector.

The Swiss Finance Institute encompasses three pre-exist- ing foundations: the International Center for Financial Asset Management and Engineering (FAME), the Stiftung Banking und Finanz an der Universität Zürich, and the Swiss Banking School.

This merger has led to the creation of one of the major European providers of research, doctoral training and advanced executive education in banking and finance. This report gives an overview of Swiss Finance Institute’s activities during 2007 and the first half of 2008.

2 Word from the Board

2007 was the second year of operation of the Swiss • The SFI PhD Program welcomed 18 new students Finance Institute. Construction signs were still and celebrated 11 new graduates, bringing the ubiquitous but the first fruits of our activity were number of active students to 73, one of the largest ready to harvest. Here are some of the highlights: student bodies for a PhD program in finance. • Research activities have led to 37 new research • The cooperation agreement with ETHZ became papers published in collaboration with FinRisk on effective, thus bringing to 6 the number of the Social Science Research Network, while 17 academic institutions partnering with SFI. important publications in top journals have been • The final official act, the merger of the Stiftung recorded in 2007 or are forthcoming. Banking und Finanz an der Universität Zürich • 665 participants from all over the world registered into the SFI foundation was concluded. for our executive education classes. • Five new professors were hired by SFI with its partner universities in 2007. With four ETHZ With new offices inaugurated in Zurich and Geneva professors joining the Swiss Finance Institute fac- and a growing staff (with a headcount approaching ulty and the three new researchers hired in 2006, 20), 2007 was a year of transformation and growth. this led to a total of 49 affiliated faculty members, It was also a year of hard work sustained by consider- all of whom benefit from some form of research able enthusiasm. This is the time for us to thank all support by SFI. involved, with a special mention to the members of • Ten professors were awarded SFI chairs and the Institute’s staff who have worked wonders under fellowships in recognition of their research high pressure. Our gratitude also goes to the mem- achievements, their intellectual reputation and bers of our Foundation Board and Advisories who their commitment to the Institute. have invested time and dedication to this collective • The second SFI visiting professor joined the undertaking despite very demanding professional faculty for the 2007-08 academic year: a specialist agendas. We thank especially Prof. J. Weber, repre- of credit risk, Darrell Duffie, Dean Witter senting the SFI-Léman Center, and Dr. C. Kleiber, Distinguished Professor of Finance at Stanford representing the Swiss Confederation, who have left University, was widely solicited by the media and the Foundation Board in the course of the year as SFI sponsors in this first year of the subprime well as Mr. P. Anghern, Credit Suisse and Mr. C. crisis. He taught a very successful PhD class and Streule, HSBC Private Bank, who have contributed delivered the keynote speech on “Portfolio to the Executive Education Advisory Board since Default Risk: Empirical Evidence” at our second its inception until the end of 2007. Annual Meeting in December. His predecessor, Peter Bossaerts, SFI visiting professor in 2006-07, In 2008, we fully anticipate continuing on the same stayed on permanently on our faculty as the first path to success. SFI professor of finance at EPFL.

Olivier Steimer Jean-Pierre Danthine Chairman of the Foundation Board Managing Director The Swiss Finance Institute Faculty

With four ETHZ professors joining the Swiss Finance Institute in Swiss Finance Institute Faculty 2007 and the hiring of seven new professors in our first two years by (June 2008) our partner universities, SFI faculty totalled 50 professors halfway through 2008. Philippe Bacchetta Giovanni Barone-Adesi * By June 30, 2008, the Swiss Finance Institute counted 50 researchers. Alessandro Beber Tony Berrada These researchers hold professorial positions at the Institute’s partner Peter Bossaerts * universities throughout Switzerland. They form one of the largest, if Marc Chesney not the largest, academic research groups in Europe. This faculty Fulvio Corsi body represents an extraordinary concentration of competencies; Jean-Pierre Danthine it will drive the translation of world-class research into an enhanced Enrico De Giorgi university finance curriculum and quality executive education in François Degeorge ** Switzerland. Bernard Dumas * Pierre-André Dumont Paul Embrechts The year 2007 saw the implementation of an end-of-2006 decision Daniela Fabbri of the Foundation Board, following a recommendation of the SFI Giovanni Favara Scientific Council, to recognize the special status of ten researchers Francesco Franzoni *** affiliated with the Swiss Finance Institute. Thus eight individuals who Patrick Gagliardini *** have distinguished themselves by their strong publication record and Fausto Galli broad international reputation have received an SFI Senior Chair or Hans Geiger Rajna Gibson Brandon * an SFI Fellowship. Simultaneously, two younger scholars with highly Manfred Gilli promising potential were offered Swiss Finance Institute Junior Chairs. Michel Habib * Thorsten Hens ** With two recruitments in 2006, three recruitments in 2007, and Martin Hoesli one recruitment in the first semester of 2008, the core SFI faculty Julien Hugonnier *** now boasts seven professors holding senior chairs, four SFI fellows Jean Imbs and six junior chairs. The overall SFI research team includes Eric Jondeau Felix Kubler * thirty-three additional professors with permanent or temporary Jean Lefoll University contracts, all active in research under the name of, Markus Leippold and eligible for support from the Institute. Henri Loubergé Semyon Malamud Erwan Morellec * Eric Nowak Center highlights Claudio Ortelli Marc Paolella At the SFI Léman Center two new professors were hired: Peter Bossaerts as an Michael Rockinger ** SFI Senior Chair at the EPFL and Alexei Zhdanov as an SFI Junior Chair at Olivier Scaillet ** the University of Lausanne. The University of Lausanne was also fortunate to Enrique Schroth Norman Schürhoff *** welcome Darrell Duffie as an SFI Visiting Professor this year! Martin Schweizer Didier Sornette At the SFI Lugano Center, Francesco Franzoni was hired as an SFI Junior Chair. Pascal St-Amour Paolo Vanini At the SFI Zurich Center, appointments for Felix Kubler as an SFI Senior Chair Rudolf Volkart and Alexander Wagner for a tenure track assistant professor position for 2008 Alexander Wagner were both implemented by the University of Zurich. Mei Wang Lucy White *** Alexei Zhdanov *** Alexandre Ziegler

* Senior Chair ** Research Fellow *** Junior Chair

4 Research Highlights

The visibility of the Swiss Finance Institute in the international academic world will in large part be proportional to the number “Municipal bonds trade in opaque, and quality of publications by affiliated researchers in top academic decentralized broker-dealer markets in journals, i.e., those journals that historically have been first in which price information is costly to promoting the ideas that have changed financial practices. gather. We analyze a database of trades The Scientific Council of SFI places extra weight on publications between broker-dealers and customers in appearing in the following journals: Journal of Finance, Journal of municipal bonds. These data were only Financial Economics, Review of Financial Studies, American released to the public with a lag; the Economic Review, Journal of Political Economy, Quarterly Journal market was opaque. Dealers earn lower of Economics, Econometrica and Review of Economic Studies. average markups on larger trades, even In 2007 and the first half of 2008 the following eight articles were though dealers bear a higher risk of losses published: with larger trades. We estimate a bargain- ing model and compute measures of deal- A GARCH Option Pricing Model with Filtered Historical Simulation, er’s bargaining power. Dealers exercise Giovanni Barone-Adesi, Robert F. Engle and Loriano Mancini, substantial market power. Our measures The Review of Financial Studies, 21(3), pp 1223-1258, 2008. of market power decrease in trade size and increase in the complexity of the trade Heterogeneous Preferences and Equilibrium Trading Volume, for the dealer.” Abstract from Financial Tony Berrada, Julien Hugonnier and Marcel Rindisbacher, Intermediation and the Costs of Trading The Journal of Financial Economics, vol. 83 (3), 2007. in an Opaque Market, Richard C. Green, Burton Hollifield, and Prices and Allocations in Financial Markets: Theory, Econometrics, Norman Schürhoff, The Review of and Experiments, Peter L. Bossaerts, Charles Plott and William Financial Studies. Zame, Econometrica, vol. 75, pp 993-1038, 2007.

The Role of Knowhow Acquisition in the Formation and Duration of Joint Ventures, Michel A. Habib and Pierre Mella-Barral, The Review of Financial Studies, vol. 20 (1), pp 189-233, 2007. Outstanding Paper Award Professors Susan Kerr Christoffersen Approximation and calibration of short-term implied volatilities and Sergei Sarkissian of McGill under jump-diffusion stochastic volatility, Alexey Medvedev and University received the first Swiss Olivier Scaillet, The Review of Financial Studies, vol. 20, pp 427-459, 2007. Finance Institute Outstanding Paper Award for their paper “City Size Financial Intermediation and the Costs of Trading in an Opaque and Fund Performance.” Prof. Market, Richard C. Green, Burton Hollifield, and Norman Christoffersen received the award at Schürhoff, The Review of Financial Studies, vol. 20(2), pp 275-314, 2007. the 2nd Annual Meeting on December Dealer Intermediation and Price Behavior in the Aftermarket 4 in Zurich while Prof. Sarkissian for New Bond Issues, Richard C. Green, Burton Hollifield, and presented their findings and received Norman Schürhoff, The Journal of Financial Economics, vol. 86 (3), the award at a public lecture in pp 643-682, 2007. Geneva on December 6 (see p 14.). The Swiss Finance Institute’s Do vertical mergers facilitate upstream collusion? Volker Nocke Outstanding Paper Award is given and Lucy White, American Economic Review, vol. 97(4), 2007. annually to an unpublished research paper circulated over the previous 12 In addition 37 research papers were placed into the SSRN – months and making an outstanding Swiss Finance Institute series in 2007 with 16 more papers in the contribution to the field of finance. first half of 2008. This series was launched in 2006 as a collaborative The jury selecting the winning project between SFI and NCCR FINRISK with both partners paper is headed by SFI Senior Chair sharing costs equally. This series is published on the SSRN website Prof. Michel Habib. www.ssrn.com/link/swiss-finance-institute.html. A complete list of the 2007 papers is available on pages 26-28 of this report.

5 The Swiss Finance Institute Research Partner: NCCR FINRISK

Based on the FINRISK / SFI cooperation agreement, 2007 in Zurich. SFI faculty, including most FINRISK the active collaboration between both entities has been project directors and other senior FINRISK members, consolidated during 2007 and 2008. In the following came together to discuss recent developments (new pages the major joint activities by FINRISK and hirings etc.) related to FINRISK and SFI research SFI during the reporting period are listed. activities, and to coordinate developments of the doctoral program. In 2008, both SFI and FINRISK SFI Funded FINRISK Research Project held their General Assemblies at the SFI/FINRISK A new FINRISK research project on “Equilibrium Annual Workshop. Asset Pricing”, headed by Senior Chair Bernard Dumas (University of Lausanne and SFI) was launched in SFI / FINRISK Annual Doctoral Workshop in Finance 2007. It is fully financed by SFI and includes several Each year since 2002 more than 20 doctoral students academics from the University of Lausanne as well as from the FINRISK network institutions present their Senior Chair Felix Kubler (University of Zurich and current research in progress at a workshop organized SFI) as of June 2008. by SFI and FINRISK and sponsored by the Study Center Gerzensee Foundation. Each paper is dis- The general theme of the project is the impact of cussed by another doctoral student before René Stulz “imperfections” on the prices prevailing in the finan- (Ohio), Jerome Detemple (Boston) as well as other cial markets and on the equilibrium values of the professors from FINRISK provide their comments. choices made by financial agents. The ultimate goal is Doctoral awards recognizing outstanding research to determine empirically which combination of “imper- papers and discussions led by students are given out fections” best explains observed financial market each year following the workshop. (For more informa- prices. In this way, observed prices will provide informa- tion please see page 7 of this report.) tion about the underlying behavior pattern of financial market participants (households and firms). The Sixth Swiss Doctoral Workshop in Finance was organized on June 14-15, 2007 in parallel to the Some of the imperfections may also limit the ability of FINRISK Research Day 2007. The FINRISK / SFI the financial economists to draw inferences about the faculty (about 50 academics) attended the four meaning of financial market prices, and the ability of “module workshops”. They presented and discussed traders to make decisions. ongoing research projects in their respective field of Risk Management, Asset Pricing and Portfolio The “imperfections” to be studied will be of several Management, Corporate Finance and Quantitative kinds: transactions costs when processing orders in the Methods in Finance. In addition, Peter Bossaerts (at market, costs of adjusting the physical capital of firms, the time SFI visiting professor at the University of time-varying information arrival causing time-varying Lausanne) held a keynote lecture on neuro-finance. volatilities and jumps in prices so that returns have non-standard probability distributions, large numbers The Seventh Swiss Doctoral Workshop in Finance of state variables making it impossible to determine was held from June 2-3, 2008 again in parallel to the optimal portfolios exactly, changes in the boundaries FINRISK Research Day 2008. SFI and FINRISK also of the firm making it difficult to track returns for the held their General Assemblies during the Workshop same activity over time, imperfect information of with the first evening ending with a keynote lecture traders about the moments (first to fourth) of the by Felix Kubler, SFI Senior Chair beginning June 1 securities returns distribution, presence of some at the University of Zurich, on robust computational “behavioral” features in the choices of traders, limited experiments in finance. On the second day of participation of households to the financial market the Workshop, a meeting to further coordinate and prospect of default. the doctoral program in finance across SFI Centers took place. This comprehensive event was the Joint FINRISK / SFI General Assembly largest to date with over 80 participants. The FINRISK General assembly was held together with the SFI General (Research) Assembly on May 24,

6 The Swiss Finance Institute PhD Program in Finance

“Knowledge is a magical resource: it enriches only when it is used, comes alive only when it is shared, grows only when it is challenged. If it does not move forward, it dies; if it is not transmitted, it stagnates; if it becomes a belief, it falls silent. When it grabs you, it carries you, transforms you and calls you into question.” Dr. Charles Kleiber, former Secretary of State, State Secretariat for Education and Research, Bern and former member of the Swiss Finance Institue Foundation Board.

Launched in autumn 2006, the Swiss Finance Institute In spring 2008 a large number of participants enrolled PhD Program in Finance is targeted towards the in the Advanced Doctoral Course “Financial Modeling pursuit of academic excellence. It aims at providing an with Affine Processes” given by Prof. Darrel Duffie intellectual environment and a curriculum comparable (SFI Visiting Professor at the University of Lausanne). with the top PhD programs in Europe and North This six day long course had more than 30 participants America. The PhD program operates on the three - the largest Advanced Doctoral Course to date! Swiss Finance Institute campuses in Geneva/Lausanne (Léman), Lugano and Zurich under a strong collabora- SFI PhD Program Assessment by SNSF review panel tion with the NCCR FINRISK (see previous page). for FINRISK Prof. E. Morellec, SFI professor at the University of Erwan Morellec and Eckart Jaeger presented the SFI Lausanne, acts as overall coordinator of the SFI PhD PhD program in greater detail to the SNSF review program. In 2007, 11 students graduated and 18 new panel at the FINRISK site visit in April 2007. The inter- students joined the program, bringing the number of national experts were impressed by the achievements active students to 73 and student researchers to 55 at of FINRISK and SFI to develop a first class Swiss wide the end of the year. In the first half of 2008, three PhD program in Finance. According to the SFI / FIN- additional students graduated from the program. RISK agreement, the SNSF review panel will continue to assess the SFI PhD program over the next few years. SFI / FINRISK Doctoral Courses The next assessment will take place in Fall 2008 at the A total of 10 doctoral courses in finance were jointly next FINRISK site visit. The main evaluation criterion organized by FINRISK and SFI in 2007. According to will be the placement record of the program graduates. the FINRISK / SFI cooperation agreement, these courses are offered to doctoral students from any PhD Awards and Support Swiss University. Swiss Finance Institute Best Paper Doctoral Award The SFI Best Paper Doctoral Award was begun in 2003 • Empirical Corporate Finance, Michel Habib (Zurich) by the International Center FAME and from 2006 has • Corporate Finance Theory, Erwan Morellec been extended to all Swiss Doctoral Students in (Lausanne) Finance under the auspices of NCCR-FINRISK and SFI. • Modern Dynamic Asset Pricing Models, Pietro It awards a PhD student for an outstanding research Veronesi (Chicago) paper presented at the Annual Doctoral Workshop • Dynamic Asset Pricing, Suleyman Basak (London) organized by FINRISK and SFI. The winning paper is • Behavioural Portfolio Theory, Enrico De Giorgi nominated by a committee formed of outside experts (Lugano) participating in the Workshop and is selected by faculty • Perturbation Methods in Modern Financial representatives from each SFI Academic Center. The Economics, Semyon Malamud (ETHZ) Award is bestowed upon the winner at the SFI Annual • Financial Econometrics, Fabio Trojani and Meeting and the recipient receives CHF 2’000 and a Patrick Gagliardini (St Gallen) certificate for her/his accomplishment. In 2007 this • Evolutionary Finance, Klaus Reiner Schenk-Hoppé Award was bestowed upon Sébastien Michenaud from (Leeds) University of Lugano and SFI, for his paper on “Analysts • Numerical Methods in Finance, Denis Talay (INRIA; Consensus Fixation and Corporate Investment“. In France) 2008, the Award will be given to Laurent Frésard from • Empirical Asset Pricing, Lu Zhang (Michigan) the University of Neuchatel at the SFI Annual Meeting

7 for his paper “Financial Strength and Product Market Lukas Schmid Behavior: The Real Effects of Corporate Cash Holdings”. Visiting Scholar, The Wharton School, University of Pennsylvania Swiss Finance Institute Best Discussant Doctoral Award The SFI Best Discussant Doctoral Award was begun Swiss Finance Institute Applied Research Prize of the by SFI in 2007 and is awarded to PhD students for Fondation Nicolas et François Grandchamp an outstanding discussion of a paper presented at Wishing to contribute to the research and teaching envi- the Annual PhD Workshop organized by FINRISK ronment of the Lemanic area in the field of finance, the and SFI. The recipients are selected by the chair- “Fondation Nicolas et François Grandchamp” men of the respective workshop sessions. The announced in 2007 the creation of an Annual Prize of Awards are bestowed upon the winners at the SFI CHF 30'000. The prize of the “Fondation Nicolas and Annual Meeting and the recipients receive CHF François Grandchamp” rewards the best PhD Thesis or 1’000 (to be shared among the winners) and a the best Doctoral Research Project submitted by doctor- certificate for her/his accomplishment. In 2007 al students or graduates affiliated with the Swiss Finance the recipients were Alex Jeanneret (SFI Léman), Institute - Léman. A committee headed by the Director Anna Cieslak and Andrea Vedolin (both from of the doctoral program evaluates all the theses submit- St Gallen). At the 2008 Annual Meeting Jan-Peter ted in the previous 12 months as well as the research Kulak and Rodolfo Prieto, (SFI Léman) and Leon projects submitted by doctoral students in the last phase Bogdan Stacescu, (SFI Zurich/FINRISK Graduate of their dissertation. The latter has the specific objective 2008), will receive these awards. of permitting a fruitful research visit abroad.

Advanced Doctoral Grants and PhD Study Abroad The 2007 recipient of this Prize was Lukas Schmid. Swiss Finance Institute PhD students with academic Lukas obtained a master’s degree in mathematics from ambitions are strongly encouraged to spend an ETH Zurich and a master’s degree in economics from extended visit abroad in a top department under the HEC Lausanne. With the support of the Swiss National pre-arranged supervision of a researcher interested in Science Foundation he was a visiting scholar at the the PhD student’s research. To that effect, on the rec- Wharton School of the University of Pennsylvania in ommendation of the Scientific Council, SFI instituted Philadelphia for two years and will soon be working a program of advanced doctoral grants guaranteeing at the Fuqua School of Business, Duke University. His financial support for up to CHF 40'000 per candidate. research interests include asset pricing and quantitative At the end of 2007, Maria Cecilia Bustamante, a corporate finance. Léman Center PhD student received SFI sponsoring to become a visiting scholar at the University of Graduate Placements California Berkeley. Other PhD students who have The Swiss Finance Institute PhD Program counts a studied abroad during 2007 and 2008 are: growing number of outstanding graduate placements. Coming from either its foundation programs (FAME Laurent Barras and FINRISK) or the Swiss Finance Institute program Visiting Researcher at Imperial College’s Tanaka itself, our graduates are increasingly successful at Business School in London securing notable positions at prestigious academic and financial institutions. Gorazd Brumen, at the Bendheim Center for Finance, University of Princeton, USA New graduates of the Swiss Finance Institute doctoral program in Lugano, Lausanne and Zurich with Alex Jeanneret at the Kennedy School of Government, academic aspirations have taken up assistant professor- Harvard University, USA ships at prestigious finance faculties, including the Fuqua School of Business, Duke University, Jones Artashes Karapetyan at Harvard University, USA Graduate School of Management, Rice University, and the BI Norwegian School of Management. Florian Peters at the Department of Economics, University of California, Berkeley, USA Graduates selecting a career in the financial market- place have obtained positions at prestigious institutions Giovanni Walter Puopolo at the Graduate School of such as UBS, Credit Suisse, RiskMetrics, Morgan Business, University of Chicago, USA Stanley, Barclay’s Wealth, BCV etc. to name just a few.

8 SFI PhD’s 2007 Frédéric Sonney Kremena Bachmann-Damianova FAME PhD 2007 Post-Doc ISB, University of Zurich University of Neuchâtel Quantitative Investment Manager, Laurent Barras Banque Cantonale Vaudoise Visiting Researcher at Imperial College’s Tanaka Business School in London Martin Vlcek NCCR FINRISK PhD 2007 Matthias Hagmann-von Arx University of Zurich Head of Quantitative Research, Concordia Advisors, Quantitative Investment Manager, London Banque Cantonale Vaudoise

Zhijiang (Brien) Huang Quantitative Researcher, Credit Suisse in London SFI PhD’s 2008 Sébastien Michenaud Amine Jalal Assistant Professor of Management, Trader, Securitised Structured Derivatives, Goldman Jesse H. Jones Graduate School of Management, Rice Sachs International University, Houston TX, USA

Benoit Metayer Ganna Reshetar Associate Director, Barclays Wealth, London Financial Services Advisor, Deloitte Zurich Jijun (Robert) Niu Assistant Professor of Finance, Faculty of Business Leon Bogdan Stacescu Administration, Simon Fraser University Assistant Professor, BI / Norwegian School of Management, Oslo Florian Peters Post-Doc, The University of California, Berkeley, USA

Lukas Schmid Assistant Professor, Fuqua School of Business, Duke University

9 Executive Education

Overview 2007 Key figures for the Swiss Finance Institute In its second year of operation Executive Education executive education in 2007 at the Swiss Finance Institute continued its success by offering 28 courses for 665 participants from all • In 2007 the SFI offered 28 courses for a total of over the world! 43 weeks of Executive Education: > 21 courses in advanced finance for a total of 25 weeks Three quarters of the participants of our international > 7 courses in bank management for a total of 18 weeks programs came from outside of Switzerland, represent- • 665 participants took one or more of the Institute's ing 40 different nationalities, demonstrating the inter- courses; 137 graduated from one of its diploma courses! national recognition of our programs! • In the SFI international programs more than 75% of participants came from outside of Switzerland, Executive Education is where the intellectual capital representing 40 different nationalities of the Swiss Finance Institute can have the most immediate impact on the finance industry. Executive Education can short-cut the normal diffusion of new knowledge which takes place through young graduates and PhDs joining the industry. However, this requires In finance the Swiss Finance Institute expanded its that research results are conveyed in a palatable and offer in 2007 to 20 one-week courses, besides the tradi- practically useful form. And this is where SFI Executive tional 4+1-week immersion Certificate Program in Education wants to excel on an international level! Financial Asset Management and Engineering (FAME). In bank management 4 open-enrolment courses for The fact that the Swiss Finance Institute can look back executives were held, plus the 5-week SFI Advanced on 25 years of experience in executive education in Executive Program and the 7-week, two-year SFI finance and 20 years of executive education in bank Executive Program. In addition the SFI contributed to management, through its predecessor organizations, the Master in Wealth Management offered by the gives it a sound basis to build on. Singapore Management University together with the Wealth Management Institute of Singapore. On an To achieve this goal the Swiss Finance Institute has international graduate level in banking and finance, developed a clear and focused, but also very ambitious, this is one of the broadest offerings in the world! strategy for its Executive Education offering: • It will concentrate exclusively on advanced graduate The strategy of SFI Executive Education requires SFI to level finance courses on the one hand, and on bank augment these programs with selected Executive management courses for executives on the other Master degree programs, ideally in co-operation with hand. Swiss and international universities. In this way the • In both areas the Swiss Finance Institute will offer Swiss Finance Institute will focus the Swiss academic open-enrolment programs on a graduate level, as resources in finance and banking to become similar to well as Diploma and Master Programs with highly a Graduate Business School, with degree programs, a selective admittance. PhD Program and Research. For the Master programs • With a few exceptions, all programs will be aimed at extensive discussions have been held and detailed a global audience, so as to foster the exchange of preparatory work has been accomplished by the Swiss ideas on the foremost frontiers of knowledge and Finance Institute together with its partners towards experience. this goal.

The strategy comes with a clear roll-out plan which is currently being implemented.

10 The Executive Education offering: Finance optional one-week pre-course which covers the In 2007 the Swiss Finance Institute celebrated the 25th foundations of finance. In the program, placed under anniversary of the Geneva Executive Courses in Finance the scientific supervision of Prof. Salih Neftci (New and the 12th year of the Certificate in Financial Asset School, New York), each module is taught by a leading Management and Engineering. (CFAME). In recogni- academic supported by practitioners. 28 participants tion of our confirmed reputation, the Swiss Finance joined this program in 2007 representing 20 countries Institute with its Geneva courses was accredited by the from around the globe. The international nature of Chartered Financial Analyst Institute (CFA) as an the program is shown in the pie chart hereunder. Approved Provider of continuing education. CFAME Participants’ origin in 2007 – The Geneva Executive Courses in Finance A truly international program: No other year has seen so many jubilees among our GECF professors. Our sincere thanks for their long and outstanding contribution to executive education went to: Stephen Schaefer, London Business School - 25 years North America Richard Levich, Stern School of Business, Europe New York - 20 years, Middle East and for their 10 years of teaching: Switzerland Yacine Aït Sahalia, Princeton University South America Francis Diebold, University of Pennsylvania and Asia Wharton School Philippe Jorion, University of California, Irvine

The main feature of the Swiss Finance Institute courses Finance Courses for Central Bankers with the Study lie in the fact that our professors have unique insights Center Gerzensee into the functioning of financial markets through their The Study Center Gerzensee and the Swiss Finance research and their consulting activities. This enables Institute jointly organize finance courses for central them to see both the theoretical and practical aspects, bankers. Some of these courses provide an overview which, given their pedagogical skills, they are able to of recent developments in quantitative finance that convey effectively to course participants. are relevant for researchers from these organizations, other courses address new developments in financial The 2007 courses were newly grouped into markets and financial theory for the benefit of Fundamentals, Asset Class and Special Topics to central bank economists. All of these courses are by facilitate a better understanding of which courses invitation only. would fit the individual's needs. New subjects ranged from Private Equity by Prof. Per Strömberg, to Behavioral Finance in Advising Private Clients by The Executive Education offering: Prof. Thorsten Hens. Selected practitioners joined in Bank Management to demonstrate how they use the financial modeling, In bank management, the focus of the Swiss Finance risk and asset management tools in their day-to-day Institute is on providing insights on the key trends for life. The 20 courses offered were attended by 259 the finance industry, both on a strategic and on an participants coming not only from major commercial operational level. The concepts underlying these financial institutions, but also from the World Bank, trends are presented by academics selected for their the European Central Bank and various national extensive industry exposure, and their understanding central banks and sovereign institutions. of the implications of these concepts for the finance industry. Senior executives are invited to present their Certificate in Financial Asset Management and institution’s reaction to these developments: Engineering (CFAME) the strategic responses to the optimized challenges on In its 12th year, CFAME is an intensive 4+1-week pro- one level, and the state of the art implementation of gram designed to provide applied training in state-of- new operational techniques on the other. Finally, the the-art techniques and practices used in asset manage- carefully selected participants are of the highest caliber, ment and financial engineering. Taught in Lausanne in ensuring a critical discussion of the presented ideas a technology laboratory, CFAME is preceded by an among peers.

11 Seminars in Bank Management Participants Executive Education courses In 2007 the Swiss Finance Institute organized four in 2007 national and international seminars with 113 partici- pants. The most prestigious of these seminars is the Finance five-day International Private Banking Retreat for Geneva Courses 259 Managing Directors. In 2007 this seminar addressed FAME Certificate 28 the strategic developments in Private Banking and Wealth Management for the 9th time, with worldwide Bank Management participation. Banking Seminars 113 SFI Executive Programs and SFI Executive Program and SFI Advanced Executive Advanced Executive Programs 211 Program in Bank Management Master Programs 54 These two German-speaking part-time bank manage- ment programs gathered a total of 211 participants Total 665 in 2007. The aim of these programs is to develop a broadened understanding of the finance industry, and thereby achieve an improved quality of decision-mak- ing and a superior ability to interact with colleagues Outlook 2008 from other business areas. In the Executive Program 2008/2009 83 participants have successfully completed the Fundamentals of The SFI Executive Program is 7 weeks long, spread Finance course. This is a one-week course which is a over a two year period. It is aimed at young Vice prerequisite for the admittance to the core part of the Presidents; the SFI Advanced Executive Program con- Executive Program. sists of 25 days spread over one year, and is aimed at Senior Vice Presidents and Executive Directors. Both The Advanced Executive Program 2008 started in are comparable in style to a shortened MBA program, February with the first of its ten 2.5 day modules with with extensive use of cases, class discussions, and 33 participants. The program will last until December group presentations to incorporate the experience of 2008. the widely diverse participants. Both programs utilize Finally, the new Senior Management Program can be about a dozen professors selected from Swiss and successfully launched with 25 participants starting in foreign universities, each of them responsible to lead July with the first one-week module held in Geneva. one specific subject. Up to eighty senior executives This will be followed by another three modules to be join for special presentations and in-depth discussions. held in London, Madrid, and Warsaw.

Master Program Eight Geneva Executive Courses in Finance were held The Swiss Finance Institute is also responsible for in the first half of 2008. These will be followed by the two-week Swiss module of the Master in Wealth another 13 courses in the second half of 2008 for a Management offered by the Singapore Management total of 21 courses. Among the courses offered so far University, with the Wealth Management Institute in in 2008 was the successful launch of a course on the third partner. The Swiss module was held for the Emissions Trading, addressing new trading areas such 3rd time in 2007, with 54 participants from Singapore as carbon emissions trading. and South East Asia.

12 Marketing and Communications

Alumni Association MEDIA PROFILE The Swiss Finance Institute Alumni Association (SFIAA) took over from the former Swiss Banking During 2007, the Swiss Finance Institute intensified School Alumni Association on April 28, 2006. its efforts to develop and enhance its media profile. In the past graduates of the Executive Program, Efforts focused on strengthening contacts with the Advanced Executive Program and the journalists, the publication of press releases and International Wealth Management Executive newsletters, and the establishment of methods to MBA were eligible to join. As a new development assess the media profile of the Swiss Finance the SFIAA was opened to the graduates of the Institute in print, radio and on the internet. Certificate in Financial Asset Management and Engineering (FAME). There are now over The number of media references to the Institute's activ- 1,200 members in SFIAA. ities during 2007 was almost identical to that enjoyed during the inauguration year, 2006. In all, there were The Swiss Finance Institute Alumni Association 117 print and radio references to the Institute in 2007, promotes compared to 122 in 2006. • networking among its members • further education of its members by means The Institute enjoyed a substantial year-on-year increase of seminars and lectures (in collaboration in media references between the months of September- with the Swiss Finance Institute) December. This coincides with the period in which the • contributing to the ongoing improvement Institute promotes its main knowledge transfer event, of the Swiss Finance Institute the Annual Meeting. A total of 67 media references appeared between September and December in 2007, In addition to an annual meeting of members, the compared with 47 references during the same period Swiss Finance Institute Alumni Association and in 2006. the Swiss Finance Institute jointly organize the Alumni Luncheons with prominent guest speakers Following the Annual Meeting, December 4th, reports as well as the SFIAA Golf Trophy in the fall. appeared in Le Temps and the NZZ, Finanz und Wirtschaft and L'AGEFI. Eight journalists registered to 2007 Alumni Luncheons attend the Annual Meeting and spent, collectively, 26.01.2007 24 hours at the event. Abbot Martin Werlen, Kloster Einsiedeln 25.04.2007 The newsletter of the Swiss Finance Institute is F. Bernhard Stalder, CEO Clariden Leu, Zurich published twice a year. The September 2007 edition 22.06.2007 contained information about new faculty appoint- Matthias Reinhart, President of the board and CEO ments, and about research publications appearing VZ Vermögenszentrum, Zurich in top international journals. A second edition of 18.09.2007 the newsletter was produced in 2007 with a focus on Maya Salzmann, Head market area UK, International doctoral education and the 2007 Annual Meeting. and Eastern Europe, Division Private Banking, This was distributed in January 2008. Credit Suisse, Zurich The distribution list for the Institute newsletter has expanded to include alumni of the Institute's executive education programs, including the Executive Program. This expansion of the distribution list reflects a broader goal to enhance our media profile with the active invol- vement of the Institute's closest affiliates and alumni.

Finally, efforts were made to examine the visibility of the Institute on the internet. During the fourth quarter, technical efforts were initiated to measure traffic on our website, and to track references published on the internet, worldwide, concerning the Institute's activities. The measurements are made using a free, industry-standard service.

13 Knowledge Transfer at the Swiss Finance Institute

“The Swiss Finance Institute is the embodiment of a vision, that as one of the world's premier centers of banking, Switzerland is perfectly positioned to be a global center of advanced research and teaching in financial economics. Through the foresight and coordinated efforts of key leaders in the financial services industry, academia, and government, this vision is now being realized across Switzerland.” Prof. Darrell Duffie, Stanford University, SFI Visiting Professor at University of Lausanne 2007/2008

The Swiss Finance Institute holds each year a number organized a conference focusing on the use of deriva- of activities to encourage scientific exchanges between tives (in particular structured products) in portfolio academic researchers, researchers affiliated with management. The conference welcomed over forty financial institutions and practitioners. academics and financial practitioners from all over the world. The high quality of presentations and Swiss Finance Institute 2nd Annual Meeting on December the intensive interactions between academics and 4, 2007 at SWX in Zurich practitioners made possible by the format of the The Swiss Finance Institute 2nd Annual Meeting was a conference made this event a highly valuable experi- full day of activities and exchanges between more ence. The Conference ended with an outstanding than 200 Swiss and international academics and finan- presentation by Prof. Bernard Dumas, SFI Professor cial professionals. The Meeting was structured along at the University of Lausanne, on “Why not trade two parallel sessions. Prof. Rajna Gibson chaired two pension claims?” This portion of the conference was research sessions presenting fundamental research to open to the public and was organized in collaboration the audience. Harry Huerzeler chaired the executive with Associazone Bancaria Ticinese (ABT – Ticino education session focusing on Margin Developments Banker’s Association). in the Finance Industry while Paolo Vannini chaired the knowledge transfer session focusing on Financial Innovation for Societal Risks Conference Commodities of the Future. The Meeting concluded On May 29, 2007, some 60 participants attended an with a plenary session introduced by Olivier Steimer, SFI organized conference addressing the societal risks Chairman of the Swiss Finance Institute’s Foundation posed by our aging society, climate change and natu- Board with the Plenary Speech “Portfolio Default ral resource concerns. The conference, organized by Risk: Empirical Evidence” given by Prof. Darrell Paolo Vanini, took place at the Zurich Development Duffie, Stanford University and SFI Visiting Professor Center and focused on how financial innovations can at University of Lausanne. The event was organized be used to develop sustainable and politically viable under the direction of Paolo Vanini, Head solutions to these critical challenges. The conference of Knowledge Transfer at Swiss Finance Institute and concluded with a panel discussion entitled: “Micro FinRisk. The 3rd Annual Meeting will take place on Finance and Globalization, Is There a Joint Future?”. November 18, 2008 in Geneva. City Size and Fund Performance “Why not trade pension claims?” Professor Sergei Sarkissian, McGill University, Prof. B. Dumas, SFI professor at the University of Montreal, was one of the recipients of the Swiss Lausanne, presented the results of his research on the Finance Institute Outstanding Paper Award 2007 for topic “Why not trade pension claims” in Geneva, on the paper entitled “City Size and Fund Performance”. May 1 at the occasion of the awarding of the Annual Professor Sarkissian presented the key results of this Prize of the Fondation Nicolas and François research paper in a public lecture on December 6, Grandchamp. The conference focused on the potential 2007 in Geneva while Prof. Christoffersen presented benefits of trading pension claims. For more informa- a synopsis of their findings at the Awards Ceremony tion on the Annual Prize of the Fondation Nicolas and at the SFI Annual Meeting on December 4th. François Grandchamp please see page 8 of this report.

Portfolio Management and Derivatives Conference With the generous financial support of the Stiftung Finanzplatz Schweiz, the Swiss Finance Institute (SFI)

14 Structure and Overseeing Bodies

Foundation Board

Executive Education Scientific Council Advisory Board

Managing Director Prof. Jean-Pierre Danthine

Secretary General COO Anita Belitz-Krasniqi Dr. Harry Hürzeler

Director PhD Program Knowledge Transfer Director of Executive Director of Research SFI - Léman Working Group Working Group Education Prof. Rajna Gibson Prof. Bernard Dumas Prof. Erwan Morellec Dr. Paolo Vanini Dr. Harry Hürzeler

Director SFI - Lugano Prof. Giovanni Barone-Adesi FinRisk Scientific SNF Council Review Panel Director SFI - Zürich Prof. Thorsten Hens

15 Govering Bodies

The Foundation Board of the Swiss Finance Institute is its main governing body. It includes representatives of its founding members as well as representatives of its academic regional centers. The Foundation Board is advised by the Scientific Council on matters of scientific content and by the Executive Education Advisory Board on matters of Executive Education.

Foundation Board The Foundation Board members represent the entire finance and banking community in Switzerland, both locally and internationally. The Swiss Finance Institute expresses its sincere thanks to its members who have left the Foundation Board in the course or at the end of 2007: Prof. J. Weber as representative of SFI-Léman Center and Dr. C. Kleiber as representative of the Swiss Confederation.

Swiss Finance Institute Foundation Board - June 2008

Chair Mr. Olivier Steimer Dr. Philipp Halbherr Chairman of the Board of Directors CFO and Member of the Executive Committee, Banque Cantonale Vaudoise, Lausanne Cantonal Bank of Zurich (ZKB), Zurich

Vice-Chairs Prof. Dr. Piero Martinoli Dr. Ulrich Körner President, University of Lugano, representing the CEO Credit Suisse Switzerland, Zurich Swiss Finance Institute Lugano Center

Dr. Marcel Rohner Mr. Patrick Odier Group CEO, UBS AG, Zurich Managing Partner, Lombard Odier Darier Hentsch & Cie, Geneva - as representative of the Swiss Private Members Bankers Association Mr. Raymond J. Baer Chairman of the Board of Directors, Julius Baer Dr. Urs P. Roth Holding Ltd., Zurich - as representative of the CEO, Swiss Bankers Association, Basel Association of Swiss Commercial and Investment Banks in Switzerland Dr. Pierin Vincenz CEO, Raiffeisen Group, St. Gallen Mr. Antonio Foglia Chairman of the Executive Committee, Banca del Prof. Dr. Jean-Dominique Vassalli Ceresio, Lugano – as representative of the Ticino Rector, University of Geneva, representing the Bankers Association Swiss Finance Institute Léman Center

Prof. Dr. Peter Gomez Prof. Dr. Hans Weder Chairman of the Board of Directors, SWX Swiss Rector, University of Zurich, representing the Exchange AG Swiss Finance Institute Zurich Center

Dr. Alfredo Gysi CEO, BSI SA, Lugano – as representative of the Association of Foreign Banks in Switzerland

16 Scientific Council The Swiss Finance Institute Scientific Council (SC) The members of the Executive Education Advisory counts 5 international experts nominated as a result Board are: of a wide consultation with its university partners representing the Swiss Finance Institute main fields Chair of research: financial mathematics, financial Urs Hofmann econometrics, investments, and corporate finance. Executive Advisor Learning & Development, The Foundation Board of the Swiss Finance Institute Credit Suisse has committed to make decisions with scientific content exclusively under the recommendation of its Members Scientific Council. The Swiss Finance Institute is very Prof. Dr. René Capitelli fortunate to have been able to secure the enthusiastic Managing Director, Head Business Support, support of 5 internationally reknowned experts under UBS AG and University of Basel the chairmanship of: Curdin Duschletta Prof. René Stulz Head of HR & Education, Strategy and Global Fisher College of Business, Ohio State University. Learning, UBS AG

The other members of the Scientific Council are: Per Etholm Managing Director, Citigroup Prof. Tim Bollerslev Fuqua School of Business, Duke University Prof. Dr. Rudolf Grünig University of Fribourg Prof. Patrick Bolton Columbia Business School, Columbia University Dr. Jürg Gutzwiller Member of the Board, RBA-Holding Prof. Michael Brennan Anderson School of Management, UCLA Prof. Dr. Alfred Mettler Georgia State University Prof. Ioannis Karatzas Dept of Mathematics, Columbia University Dr. Martin Moehrle Chief Learning Officer, Deutsche Bank AG The cooperation agreement with the Swiss Finance Institute and the Swiss National Science Foundation Maxime Morand indicates that the International Scientific Council of Head HR, Lombard Odier Darier Hentsch & Cie FINRISK is to act as the main supervisory body for all activities and funding falling under the heading of Matthias Wirth * Project Research. Swiss Bankers Association

* Executive Education Advisory Board Secretary Executive Education Advisory Board The Executive Education Advisory Board (EEAB) is the main supervisory body concerned with Executive Education. The Executive Education Advisory Board ensures that the Executive Education offering of the Swiss Finance Institute is of the highest quality, addresses the needs of the industry and is well coordi- nated with other initiatives within Switzerland. The Swiss Finance Institute expresses its gratitude to two members of the EEAB, Mr. C. Streule and Mr. P. Anghern, who have contributed their advice since the beginning of SFI and left the EEAB at the end of 2007.

17 18 2007 Facts & Figures

19 Summary of 2007 financial accounts

Balance sheet as of December 31, 2007

31.12.2007 CHF

ASSETS

Current assets Cash and cash equivalents 17'297'276.44 Accounts receivable 21'200.75 Other receivables 329'801.59 Prepaid expenses and accrued income 59'208.97

Total current assets 17'707'487.75

Fixed assets Investment portfolios 47'176'246.02 Due from Securities Lending and Borrowing 11'566'486.25 Deposits 50'796.65 Office equipment 83'301.60 IT equipment 59'612.90

Total fixed assets 58'936'443.42

TOTAL ASSETS 76'643'931.17

LIABILITIES AND FOUNDERS' EQUITY

Short-term liabilities Accounts payable 766'542.95 Other payables 140'383.53 Research accounts 177'119.31 Accrued expenses and deferred income 1'213'673.80 Long term loans founders 8'000'000.00

Total short-term liabilities 10'297'719.59

Founders' equity Foundation capital 15'000'000.00 Reserves 22'564'785.00 Retained earnings - As of January 1, 2007, from SFI donations and operations 28'859'492.85 - From the merger (ZHB) -595'104.97 28'264'387.88 Net result from donations and operations 517'038.70

Total founders' equity 66'346'211.58

TOTAL LIABILITIES AND FOUNDERS' EQUITY 76'643'931.17

20 Profit and loss statement for the period from January 1st to December 31, 2007

31.12.2007 CHF

Income from Executive Education courses 5'410'764.01 Expenses from Excutive Education courses -3'104'620.75

Net result from courses before general expenses 2'306'143.26

Expenses Research -1'777'467.71 Expenses Ph D Program -874'225.60 Income from Knowledge Transfer 126'885.63 Expenses from Knowledge Transfer -191'115.15 -64'229.52 Expenses Projects -613'774.10

Net operating result before general expenses -1'023'553.67

GENERAL EXPENSES

Personnel expenses -2'247'938.05 Other operating costs -1'017'666.44

Net operating result -4'289'158.16

Net extraordinary income 335'503.65 Donations 4'730'023.00

INCOME/EXPENSES ON INVESTMENTS

Total realized and unrealized gains on investments 36'813.89 Administration and bank fees -296'143.68

Total income/expenses on investments -259'329.79

RESULT FROM DONATIONS AND OPERATIONS FOR YEAR 2007 517'038.70

21 2007 and Forthcoming Publications in Academic Journals and Books by SFI Researchers

Philippe Bacchetta Asset Pricing, Handbook of Hsu and K. Preuschoff, Random Walk Expectations and Experimental Results, with C. R. Plott Neuroeconomics: Decision Making and the Forward Discount Puzzle, with and V. L. Smit, eds., New York: the Brain, ed. P.W. Glimcher, E. Van Wincoop, American Economic Elsevier, forthcoming. C.F. Camerer, E. Fehr, R.A. Review , vol. 97, pp 346-350, 2007. Poldrack, New York: Academic Risk Aversion in Laboratory Asset Press, forthcoming. Higher Order Expectations in Asset Markets, with W. Zame, Risk Aversion Pricing, with E. Van Wincoop, in Experiments, with Ed. J. Cox and Neurobiological Studies of Risk Journal of Money, Credit and Banking, G. Harrison, Greenwich, CT: JAI Assessment: A Comparison of forthcoming. Press, Research in Experimental Expected Utility and Mean-Variance Economics, vol. 12, in press. Approaches, with M. d’Acremont, Giovanni Barone Adesi Journal of Cognitive, Affective and Cutting the Hedge, with R. Elliott, Neural Antecedents of Financial Behavioral Neuroscience, forthcoming. Computational Economics, vol. 29 (2), Decisions, with B. Knutson, pp 151-158, 2007. Journal of Neuroscience, vol. 27(31), Neural Coding of Outcome pp 8174-8177, 2007. Uncertainty, with K. Preuschoff, Valuation of Derivatives Based on C. Camerer, M. Hsu, C.D. Fiorillo, Single Factor Interest Rate Models, Towards a Mechanistic P. Tobler and W. Schultz, with G. Sorwar, W. Allegretto, Understanding of Human Decision Philosophical Transactions of the Royal The Global Finance Journal, vol. 18 Making: Contributions of Society, forthcoming. (2), pp 251-269, 2007. Functional Neuroimaging, with J. O’Doherty, Current Directions in Lecture Notes in Corporate Alessandro Beber Psychological Science, forthcoming. Finance, with B. A. Ødegaard Flight-to-Quality or Flight-to- (Singapore: World Scientific Liquidity? Evidence from the Euro- Human Insula Activation Reflects Publishing, Second, Revised Area Bond Market, with M. W. Risk Predictions Errors As Well Edition 2007). Brandt and K. Kavajecz, Review of As Risk, with K. Preuschoff and Financial Studies, forthcoming. S. Quartz, Journal of Neuroscience, Jean-Pierre Danthine forthcoming. Intangible Capital, Firm Valuation Tony Berrada and Asset Pricing, with X. Jin, Heterogeneous Preferences and Markowitz in the Brain?, with K. Economic Theory, 32, pp 157-177, Trading Volume, with J. Hugonnier Preuschoff and S. Quartz, Revue 2007. and M. Rindisbacher, Journal of d’ Economie Politique, in press. Financial Economics, vol. 83 (3), 2007. The Macroeconomic Consequences Investigating Signal Integration with of Reciprocity in Labor Relations, Peter L. Bossaerts Canonical Correlation Analysis of with A. Kurmann, mimeo, Prices and Allocations in Financial fMRIBrain Activation Data, with A. Université of Lausanne, Markets: Theory, Econometrics, and Bruguier, K. Preuschoff and S. Scandinavian Journal of Economics, Experiments, with C. Plott and W. Quartz, NeuroImage, in press. forthcoming. Zame, Econometrica, vol. 75, pp 993- 1038, 2007. Neural Correlates of Mentalizing- Superneutrality, The New Palgrave Related Computations During Dictionary of Economics , 2nd ed., Equilibrium Asset Pricing Under Strategic Interactions in Humans, S. Durlauf and L. Blume eds., Heterogeneous Information, with B. with A. Hampton and J. O’Doherty, Palgrave Macmillan, London, 2007. Biais and C. Spatt, Review of Proceedings of the National Academy of Financial Studies, in press. Sciences, in press. Distribution Risk and Equity Returns, with J.B. Donaldson and The Paradox of Asset Pricing, The Neurobiological Foundations P. Siconolfi, The Handbook of the Princeton University Press - Asian ver- of Valuation in Human Decision Equity Risk Premium, R. Mehra, sion appeared 2007. Making under Uncertainty, with M. ed., North Holland Handbook of

22 Finance Series, Elsevier, P. Porchia and F. Trojani, Review Journal of Economic Dynamics and Amsterdam, forthcoming. of Financial Studies, forthcoming. Control, forthcoming.

Enrico De Giorgi Duration Time Series Models Editorial - 2nd special issue on Evolutionary Portfolio Selection with Proportional Hazard, with C. applications of optimization heuris- with Liquidity Shocks, Journal of Gouriéroux, Journal of Time Series tics to estimation and modeling Economic Dynamics and Control, Analysis, forthcoming. problems, with P. Winker, forthcoming. Computational Statistics and Data Rajna Gibson Analysis, vol. 52 (1), pp 2-3, 2007. Second Order Stochastic Technical Analysis Compared to Dominance, Reward-Risk Portfolio Mathematical Models Based Heuristic optimization methods Selection and the CAPM, with Methods under Parameters Mis- in econometrics, with P. Winker, T. Post, Journal of Financial and Specification, with C. Blanchet- Handbook of Computational Quantitative Analysis, forthcoming. Scaillet, A. Diop, D. Talay and Econometrics, E.J. Kontoghiorghes E. Tanré, The Journal of Banking and D. Belsley (eds), Handbooks Beta Regimes for the Yield Curve, and Finance, vol. 31(5), pp 1351- series of Computing and Statistics with F. Audrino, Journal of 1373, 2007. with Applications, Elsevier, in Financial Econometrics, 5(3), pp 456- preparation. 490, 2007. Financial Integration, Economic Instability and Trade Structure in Applications of heuristics in finance, Computational Aspects of Prospect Emerging Markets, with A. with D. Maringer and P. Winker, IT Theory with Asset Pricing Chambet, Journal of International and Finance, D. Seese, C. Weinhardt Applications, with T. Hens and Money & Finance, forthcoming. and F. Schlottmann (eds), Springer, J. Mayer, Computational Economics, forthcoming. 29 (3-4), pp 267-281, 2007. The Style Consistency of Hedge Funds, with G. Sébastien, Special Michel Habib François Degeorge Issue on Hedge Funds, European The Role of Knowhow Acquisition Conspicuous conservatism in risk Financial Management, vol. 13 (2), in the Formation and Duration of choice, with B. Moselle and pp 287-308, 2007. Joint Ventures, with P. Mella-Barral , R. Zeckhauser, Journal of Risk and Review of Financial Studies, vol. 20(1), Uncertainty, 35, pp 1-16, 2007. Model Risk for European-Style pp 189-233, 2007. Stock Index Options, with European corporate finance: a R. Gençay, The Journal IEEE Why Government Bonds are Sold survey, with E. Maug, in X. Freixas, Transactions on Neural Networks, vol. by Auction and Corporate Bonds by P. Hartmann and C. Mayer, eds., 18, pp 193-202, 2007. Posted-Price Selling, with A. Ziegler, Financial Markets and Institutions: Journal of Financial Intermediation, A European Perspective, Oxford Financial Integration, Economic vol. 16 (3), 2007. University Press, forthcoming. Instability and Trade Structure in Emerging Markets, with A. An Analysis of Shareholder Bernard Dumas Chambet, Journal of International Agreements, with G. Chemla and Equilibrium Portfolio Strategies Money & Finance, forthcoming. A. Ljungqvist, Journal of the European in the Presence of Sentiment Economic Association, vol. 5 (1), Risk and Excess Volatility, with A. Manfred Gilli pp 93-121, 2007. Kurshev and R. Uppal, The Journal Using economic and financial of Finance, forthcoming. information for stock selection, Thorsten Hens with I. Roko, Computational Globally Evolutionary Stable Why not Trade Pension Claims, with Management Science, forthcoming. Portfolio Rules, with I. Evstigeev J. Syz, Financial Analysts Journal, and K. R. Schenk-Hoppé, Journal vol. 63 (1), 2007. An Objective Function for of Economic Theory, forthcoming. Simulation Based Inference on Fulvio Corsi Exchange Rate Data, with P. Winker The Capitol Hill Baby-Sitting Co-op: The Volatility of Realized Volatility, and V. Jeleskovic, Journal of Economic Anecdote or Evidence for the with S. Mittnik, C. Pigorsch and Interaction and Coordination, vol. 2 Optimum Quantity of Money, with U. Pigorsch, Econometrics Reviews, (2), pp 125-145, 2007. K. Schenk-Hoppé and B. Vogt, forthcoming. Journal of Money, Credit and Banking, An efficient branch-and-bound strat- vol. 39, pp 1305-1333, 2007. Patrick Gagliardini egy for subset Vector Autoregressive Ambiguity Aversion and the Term model selection, with C. Gatu, E. Strategic Asset Allocation and Structure of Interest Rates, with Kontoghiorghes and P. Winker, Market Timing: A Reinforcement

23 Learning Approach, with International Journal of Central Performance of Nearly Efficient P. Woehrmann, Computational Banking, forthcoming. Unit Root Tests in Small Samples, Economics, vol. 29 (3-4), 2007. with S. Broda and K. Carstensen, Testing Heterogeneity within the Econometric Reviews, forthcoming. Martin Hoesli Euro Area Using a Structural Multi- Forecasting EREIT returns, with Country Model, with J.-G. Sahuc, Uniform Saddlepoint C. Serrano Moreno, Journal of Real Economics Letters, forthcoming. Approximations for Ratios of Estate Portfolio Management, vol. 13, Quadratic Forms, with R. Butler, pp 293-309, 2007. Financial Modeling Under Bernoulli, forthcoming. Non-Gaussian Distributions, with Spatial dependence, housing S.-H. Poon and M. Rockinger, Bias-Adjusted Estimation in the submarkets, and house price Springer Finance, 2007. ARX(1) Model, with S. Broda, prediction, with S.C. Bourassa and K. Carstensen, Computational E. Cantoni, Journal of Real Estate Henri Loubergé Statistics and Data Analysis, vol. 51, Finance and Economics, vol. 35, Insuring a Risky Investment Project, pp 3355-3367, 2007. pp 143-160, 2007. with R. Watt, Insurance Mathematics and Economics, forthcoming. Saddlepoint Approximations for Debt-equity choice in Europe the Doubly Noncentral Distribution, International, with P. Gaud and Erwan Morellec with S. Broda, Computational Statistics A. Bender, Review of Financial Agency conflicts and risk manage- and Data Analysis, vol. 51, pp 2907- Analysis, vol. 16, pp 201-222, 2007. ment, C. W. Smith Jr., The Review of 2918, 2007. Finance, vol. 11, pp 1-23, 2007. Securitized real estate and its link Intermediate Probability: with financial assets and real estate: Corporate control and real invest- A Computational Approach, An international analysis, with ment in incomplete markets, with John Wiley & Sons, 2007. C. Serrano Moreno, Journal of Real J. Hugonnier, Journal of Economic Estate Literature, vol. 15, pp 59-84, Dynamics and Control, vol. 31, 2007. Michael Rockinger 2007. Financial Modeling Under Financing and takeovers, with A. Non-Gaussian Distributions, with Investissement immobilier - Zhdanov, Journal of Financial S.-H. Poon and E. Jondeau, Décision et gestion du risque, Economics, forthcoming. Springer Finance, 2007. Economica (Paris), forthcoming. Eric Nowak Olivier Scaillet Jean Imbs Foreign vs. domestic listing: an Kernel based goodness-of-fit tests Growth and Volatility, Journal of entrepreneurial decision, with for copulas with fixed smoothing Monetary Economics, vol. 54(7), 2007. Y. Ding and H. Zhang, Journal of parameters, Journal of Multivariate Business Venturing, forthcoming. Analysis, vol. 98, pp 533-543, 2007. Comments on “Credit Constraints as a Barrier to the Entry and Konzerneinfluss und Entkopplung Theory and calibration of Swap Post-Entry Growth of Firms” by vom Marktrisiko - Eine empirische Market Models, with S. Galluccio, P. Aghion, T. Fally and S. Scarpetta, Analyse der Betafaktoren bei faktis- Z. Huang and J.-M. Ly, Mathematical Economic Policy, 2007. chen und Vertragskonzernen, with Finance, vol. 17, pp 111–141, 2007. C. Brüchle and O. Ehrhardt, Review of Tornell and Westermann’s Zeitschrift für Betriebswirtschaft (ZfB), The estimation of copulas: theory Boom Bust Cycles and Financial forthcoming. and practice, with A. Charpentier Liberalization, Journal of International and J.-D. Fermanian, Copulas: From Economics, vol. 71(2), 2007. Marc Paolella theory to application in finance, Ed: Asymmetric Multivariate Normal Rank J., Risk Publications, London, Eric Jondeau Mixture GARCH, with M. Haas 2007. Examining Bias in Estimators of and S. Mittnik, Computational Linear Rational Expectations Statistics and Data Analysis, A Kolmogorov-Smirnov type test for Models under Misspecification, with forthcoming. shortfall dominance against para- H. Le Bihan, Journal of Econometrics, metric Alternatives with M. Denuit forthcoming. An Econometric Analysis of and A.C. Goderniaux, Technometrics, Emission Trading Allowances, with vol. 49, pp 88-99, 2007. Optimal Monetary Policy in an L. Taschini, Journal of Banking and Estimated DSGE Model of the Finance, forthcoming. Multivariate wavelet-based shape Euro Area with Cross-country preserving estimation for depend- Heterogeneity, with J.-G. Sahuc, Assessing and Improving the ent observations, with A. Cosma and

24 R. von Sachs, Bernoulli, vol. 13, pp Dealer intermediation and price International Finance, Brigitte 301-329, 2007. behavior in the aftermarket for new Strebel-Aerni, Schulthess, 2007. bond issues, with R. C. Green and Approximation and calibration of B. Hollifield, Journal of Financial Lucy White short-term implied volatilities under Economics, vol. 86(3), pp 643-682, Foreclosure with Incomplete jump diffusion stochastic volatility, 2007. Information, Journal of Economics with A. Medvedev, Review of Financial and Management Strategy, vol. 16(2), Studies, vol. 20, pp 427-459, 2007. Pascal St-Amour 2007. An Empirical Analysis of U.S. Optimal asset allocation for Aggregate Portfolio Allocations, Do Vertical Mergers Facilitate pension funds under mortality with M. Normandin, Journal of Collusion?, with V. Nocke, risk during the accumulation Banking and Finance, forthcoming. The American Economic Review, vol. and decumulation phases, with 97(4), 2007. P. Battocchio and F. Menoncin, Paolo Vanini Annals of Operations Research, A Simple Model of Credit Prudence in Bargaining: the Effect vol. 142, pp 141-165, 2007. Contagion, with M. Leippold and of Uncertainty on Bargaining D. Egloff, Journal of Banking and Outcomes, Games and Economic Linear-quadratic jump-diffusion Finance, vol. 31, pp 2475-2495, 2007 Behavior, forthcoming. models with application to stochas- tic volatility, with P. Cheng, Property Derivatives and Index- Level Playing Fields in International Mathematical Finance, vol. 17, Linked Mortgages, with J. Syz Financial Regulation, with A. pp 575-598, 2007. and M. Salvi, Journal of Real Estate Morrison, The Journal of Finance, Finance & Economics, vol. 36, forthcoming. Local multiplicative bias correction forthcoming. for asymmetric kernel density esti- Alexei Zhdanov mators, with M. Hagmann, Journal Learning and Asset Prices under Financing and Takeovers, with of Econometrics, 141, 213-249, 2007. Ambiguous Information, with Erwan Morellec, Journal of Financial F. Trojani and M. Leippold, Review Economics, forthcoming. Local transformation kernel of Financial Studies, forthcoming. density estimation of loss distribu- Earnings and Equity Valuation tions, with J. Gustafsson, with Credit Portfolios: What Defines Risk in the Biotech Industry, with Philip M. Hagmann and J. P. Nielsen, Horizons and Risk Measurement?, Joos, Financial Management, Journal of Business and Economic with S. Ebnöther, Journal of Banking forthcoming. Statistics, forthcoming. and Finance, vol. 31 (12), pp 3663 - 3679, 2007. Alexandre Ziegler Swap market models, with S. Why Government Bonds are Sold by Galluccio, Encyclopedia of Quantitative Mei Wang Auction and Corporate Bonds by Finance, John Wiley & Sons Ltd, Prospect Theory for Continuous Posted Price Selling, with M. Habib, forthcoming. Distribution, with M. O. Rieger, Journal of Financial Intermediation, Journal of Risk and Uncertainty, vol. 16 (3), pp 343-367, 2007. CMS spread options, with S.Galluccio, forthcoming. Encyclopedia of Quantitative Finance, John Wiley & Sons Ltd, forthcoming. Are Pension Fund Managers Overconfident?, with C. Gort and A primer on weather derivatives, M. Siegrist, Journal of Behavioral with P. Barrieu, Handbook on Finance, forthcoming. Uncertainty and Environmental Decision Making, International Series Evaluating lotteries, risks, and in Operations Research and risk-mitigation programs, P. Management Science, Springer Fischbeck, Journal of Risk Research, Verlag, forthcoming. forthcoming.

Norman Schürhoff What is behind Priority Heuristic? - Financial Intermediation and the A mathematical analysis, with M. O. Costs of Trading in an Opaque Rieger, Psychological Review, Market, with R. C. Green and forthcoming. B. Hollifield, Review of Financial Studies, vol. 20 (2), pp 275-314, Does Finance have a Cultural 2007. Dimension?, with T. Hens,

25 Swiss Finance Institute Research Paper Series

The aim of the Swiss Finance Institute Research Paper Series is to disseminate original theoretical or empirical research with relevance to banking and finance. The series includes research contributions carried out at the Swiss Finance Institute and its research partner, the National Centre of Competence in Research “Financial Valuation and Risk Management” (NCCR FinRisk), by faculty, PhD students and affiliated researchers. Papers issued in 2007 were included on the Social Science Research Network Financial Economics Network. To access the Swiss Finance Institute Research Paper Series, please use the following link: www.ssrn.com/link/swiss-finance-institute.html

Swiss Finance Institute Research Preferences N°28 Paper Series 2007: Amine JALAL, Goldman Sachs Co-monotonicity of optimal invest- International ments and the design of structured N°37 financial products Equilibrium Portfolio Strategies in N°33 Marc Oliver RIEGER, University of the Presence of Sentiment Risk and Executive Compensation: The View Zurich Excess Volatility from General Equilibrium Bernard DUMAS, University of Jean-Pierre DANTHINE, University N°27 Lausanne, INSEAD (on leave), of Lausanne, CEPR and Swiss Hybrid Cat Bonds NBER, CEPR and Swiss Finance Finance Institute Pauline BARRIEU, London School Institute John B. DONALDSONl, Columbia of Economics Alexander KURSHEV, London University Henri LOUBERGE, University of Business School Geneva and Swiss Finance Institute Raman UPPAL, London Business N°32 School and CEPR Arbitrage in Stationary Markets N°26 Igor EVSTIGNEEV, University of Efficient Estimation of a N°36 Manchester Semiparametric Characteristic- Optimal Monetary Policy in an Dhruv KAPOOR, University of Based Factor Model of Security Estimated DSGE Model of the Euro Manchester Returns Area with Cross-country Gregory CONNOR, The London Heterogeneity N°31 School of Economics Eric JONDEAU, University of Robust Value at Risk Prediction Matthias HAGMANN, Concordia Lausanne and Swiss Finance Loriano MANCINI, University Advisors and Swiss Finance Institute Institute of Zurich Oliver LINTON, The London Jean-Guillaume SAHUC, Banque de Fabio TROJANI, University School of Economics France and Audencia School of of St-Gallen Management N°25 N°30 Pricing American Options Under N°35 Prospect Theory for Continuous Stochastic Volatility and Stochastic Forecasting EREIT Returns Distributions Games and Interest Rates Camilo SERRANO, University of Prospects Alexey MEDVEDEV, University of Geneva Marc Oliver RIEGER, ETH Zurich, Geneva, HEC and Swiss Finance Martin HOESLI, University of Department of Mathematics Institute Geneva, University of Aberdeen, Mei WANG, University of Zurich, Olivier SCAILLET, University of Bordeaux Business School and ISB and Swiss Finance Institute Geneva, HEC and Swiss Finance Swiss Finance Institute Institute N°29 N°34 Games and Prospects N°24 Dynamic Option-Based Strategies Marc Oliver RIEGER, University of Testing for Equality Between Two under Downside Loss Averse Zurich Copulas

26 Bruno REMILLARD, HEC University of Leeds, School of University, Department of Montréal Mathematics Applied Economics Olivier SCAILLET, University of Geneva and Swiss Finance Institute N°17 N°11 Director Independence as Strategic Closed-Form Solutions for N°23 Behavior European and Digital Calls in the Asset Pricing, Habit Memory and Alexander F. WAGNER, University Hull and White Stochastic Volatility the Labor of Zurich and Swiss Finance Model and Their Relation to Ivan JACCARD, The Wharton Institute Locally R-Minimizing and Delta School Hedges N°16 Christian-Olivier EWALD, N°22 Why Firms Purchase Property University of Leeds, School of Declining Valuations and Insurance? Mathematics Equilibrium Bidding in Central Daniel AUNON-NERIN, Zurich Klaus Reiner SCHENK-HOPPE, Bank Refinancing Operations Financial Services University of Leeds, Business Christian EWERHART, University Paul EHLING, Norwegian School School and School of of Zurich of Management Mathematics Nuno CASSOLA, European Central Zhaojun YANG, Human Bank N°15 University, School of Economics Natacha VALLA, Banque de France Conspicuous Conservatism in Risk and Trade Choice N°21 Boaz MOSELLE, The Brattle Group N° 10 Financial Market Equilibria with François DEGEORGE, University of Stochastic Volatility: Risk Cumulative Prospect Theory Lugano and Swiss Finance Institute Minimization and Model Risk Enrico De GIORGI, University of Richard ZECKHAUSER, Harvard Christian-Olivier EWALD, School of Lugano and Swiss Finance Institute University, Kennedy School of Mathematics, University of Leeds Thorsten HENS, University of Government Rolf POULSEN, Department of Zurich and Swiss Finance Institute Mathematical Sciences, University Marc Oliver RIEGER, University of N°14 of Copenhagen Zurich Stochastic Reference Points and Klaus Reiner SCHENK-HOPPE, the Dependence Structure University of Leeds, School of N°20 Enrico DE GIORGI, University of Mathematics and Leeds University Do Stylised Facts of Order Book Lugano and Swiss Finance Institute Business School Markets Need Strategic Behaviour? Thierry POST, Erasmus University Dan LADLEY, University of Leeds, Rotterdam N° 9 Business School Benchmarks in Aggregate Klaus Reiner SCHENK-HOPPE, N°13 Household Portfolios University of Leeds, School of A Specification Test for Pascal ST-AMOUR, HEC University Mathematics Nonparametric Instrumental of Lausanne, HEC University of Variable Regression Montreal and Swiss Finance N°19 Patrick GAGLIARDINI, University Institute Strategic Asset Allocation, Asset of Lugano and Swiss Finance Price Dynamics, and the Business Institute N° 8 Cycle Olivier SCAILLET, University of Bankcruptcy Law and Firms’ Ivan JACCARD, Wharton School of Geneva, HEC and Swiss Finance Behavior Finance Institute Anne EPAULARD, University of Paris Dauphine and Cepremap N°18 N°12 Aude POMMERET, University of Sovereign Rating Transitions and Anomalies in Intertemporal Lausanne and Ires the Price of Default Risk in Choice? Emerging Markets Anke GERBER, University of N° 7 Alena AUDZEYEVA, University of Zurich and Swiss Banking Background Filtrations and Leeds, Business School Institute Canonical Loss Processes for Klaus Reiner SCHENK-HOPPE, Kirsten I.M. ROHDE, Erasmus Top-Down Models of Portfolio

27 Credit Risk N° 3 Philippe EHLERS, ETH Zurich, A GARCH Option Pricing Model D-MATH with Filtered Historical Simulation Philipp J. SCHOENBUCHER, ETH Giovanni BARONE-ADESI, Zurich, D-MATH University of Lugano and Swiss Finance Institute N° 6 Robert F. ENGLE, New York Aggregating Phillips Curves University, Leonard Stern School of Jean IMBS, University of Lausanne, Business HEC and Swiss Finance Institute Loriano MANCINI, University of Eric JONDEAU, University of Zurich and Swiss Banking Institute Lausanne, HEC and Swiss Finance Institute N° 2 Florian PELGRIN, University of Barrier Option Pricing Using Lausanne, HEC and CIRANO Adjusted Transition Probabilities Giovanni BARONE-ADESI, N° 5 University of Lugano and Swiss Prices and Portfolio Choices in Finance Institute Financial Markets: Theory, Nicola FUSARI, University of Econometrics, Experiments Lugano and Swiss Finance Institute Peter BOSSAERTS, California John THEAL, University of Lugano Institute of Technology Centre for and Swiss Finance Institute Economic Policy Research and Swiss Finance Institute N° 1 Charles PLOTT, California Institute An Objective Function for of Technology Simulation Based Inference on William R. ZAME, UCLA and Exchange Rate Data California Institute of Technology Peter WINKER, Department of Economics, University of Giessen N° 4 Manfred GILLI, University of Why Do the Swiss Rent? Geneva and Swiss Finance Institute Steven C. BOURASSA, University of Vahidin JELESKOVIC, Department Louisville, School of Urban and of Economics, University of Giessen Public Affairs Martin HOESLI, University of Geneva, HEC and Swiss Finance Institute

28 Overview of courses offered in 2007 by the Swiss Finance Institute

Programs in Bank Management

March 19 - 30, 2007 • Master of Science in Wealth Management, Swiss Study Block

The Swiss Finance Institute delivers the Swiss Study Block for this program of the Singapore Management University and the Wealth Management Institute of Singapore. This part-time program develops high potential Private Banking advisors and Asset Managers particularly for the Asian region.

March 2007 - December 2007 • Executive Program in Bank Management

The Executive Program combines solid knowledge and skills in management with practical know-how and insight into the functioning of the financial sector. It lasts a total of 7 weeks, spread over 16 months. This course is held predominantly in German.

In December the celebration of the 20th anniversary of the Executive Program took place at the Hyatt in Zurich.

February 2007 - November 2007 • Advanced Executive Program in Bank Management

The Advanced Executive Program helps senior executives from financial and related sectors to strengthen their management competences, to broaden their factual knowledge and to promote integrated thinking with respect to the current dramatic trends in the financial sector. The course comprises 10 modules, each lasting two and a half days. The course is held predominantly in German.

• Senior Management Program in Banking

The Senior Management Program in Banking brings together a dynamic interna- tional faculty, industry leaders and peers to present and discuss strategic develop- ments in the finance industry. The program is split into four blocks lasting 4-6 days, for ease of participation with each block taking place at a different European finan- cial center. This course is held in English.

During 2007 the course has been developed and the respective marketing activities have been initiated.

29 Seminars in Bank Management

The following seminars last between 3 and 6 days and are aimed at Executives from clearly targeted segments. They are taught by a mixture of academics and senior practitioners.

• International Private Banking and Wealth Management Retreat Various Academics and CEOs from Private Banking

• Team Leader in Private Banking Peter Schuppli

• International Wealth and Tax Planning Various Academics and experts from Wealth Planning

Programs in Finance

July 23 - August 24, 2007 Certificate in Financial Asset Management and Engineering

This 4+1-week immersion program offers intensive training in state-of-the-art techniques and practices of asset management and financial engineering. Focusing on applications with a view of achieving in-depth understanding of modern finance, the program provides a certification that is unique for its breadth, compactness and intellectual stimulation.

30 Geneva Executive Courses in Finance

The Swiss Finance Institute offers one of the most extensive and thorough overviews of major developments in finance currently available. Known as the Geneva Executive Courses in Finance, this suite of independent courses is taught by world renowned experts, with each course lasting from 2 to 5 days.

Fundamentals • ALTERNATIVE INVESTMENTS Thomas Schneeweis and Giovanni Beliossi • GLOBAL ASSET ALLOCATION AND RISK BUDGETING • REAL ESTATE INVESTMENT AND FINANCING Philippe Jorion J. Baumberger, Ph. Sormani, M. Hoesli and O. Scaillet • INTEGRATED RISK MANAGEMENT René Stulz • USING AND MANAGING INFLATION LINKED INSTRUMENTS AND THEIR DERIVATIVES • VOLATILITY AND CORRELATION: PRACTICAL David Cox METHODS FOR FINANCIAL APPLICATIONS Tim Bollerslev

• BEHAVIORAL FINANCE AND INVESTMENT Special Topics STRATEGY Werner De Bondt • FINANCIAL ECONOMETRICS AND FORECASTING Francis Diebold • QUANTITATIVE APPROACHES FOR EQUITY PORT- FOLIO MANAGEMENT • INTEREST-RATE MODELS: THEORY AND François-Serge Lhabitant PRACTICAL APPLICATIONS Yacine Aït-Sahalia • IMPLEMENTING QUANTITATIVE TECHNIQUES FOR FINANCIAL MARKETS • CALIBRATION, ESTIMATION AND NUMERICAL David Cox METHODS IN FINANCE Salih Neftci

Asset Class • PRACTICAL SOLUTIONS FOR ECONOMETRIC ISSUES IN ASSET ALLOCATION • PRIVATE EQUITY Michael Brandt Per Strömberg • EXCHANGE-RATE ECONOMICS AND FORECASTING • STRUCTURED PRODUCTS Richard Levich Salih Neftci • BEHAVIORAL FINANCE AND WEALTH • ADVANCED EQUITY PORTFOLIO MANAGEMENT MANAGEMENT FOR PRIVATE CLIENTS G. Andrew Karolyi Thorsten Hens

• MODERN FIXED INCOME MARKETS: • CREDIT RISK AND CREDIT DERIVATIVES: RELATIVE VALUE, ARBITRAGE, PORTFOLIO LATEST THEORIES AND BEST PRACTICES AND RISK MANAGEMENT Didier Cossin Stephen Schaefer

31 The Swiss Finance Institute gratefully acknowledges the precious support of its founding members:

32 cover AR-SFI-07 22.10.2008 11:29 Page 2

Impressum

The Swiss Finance Institute Activity Report is published once a year. A publication of the Swiss Finance Institute.

Editor: Jean-Pierre Danthine. Contributors to this issue: Anita Belitz-Krasniqi, Tobe Freeman, Harry Hürzeler The Activity Report can be obtained free of charge from:

Swiss Finance Institute Bd. du Pont d'Arve 40 1211 Geneva 4 - Switzerland Tel +41(0)22 379 84 71 - Fax +41(0)22 379 82 77 www.SwissFinanceInstitute.ch - [email protected] cover AR-SFI-07 22.10.2008 11:29 Page 1

Activity Report 2007-2008

Geneva Zürich Bd. du Pont d'Arve 40 Walchestrasse 9 1211 Geneva 4 8006 Zurich Switzerland Switzerland

T +41 22 379 84 71 T +41 44 254 30 80 F +41 22 379 82 77 F +41 44 254 30 85 [email protected] [email protected]

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