Finance and Risk Management

Finance and risk management is one of the core topics at Labex MME-DII. Research in financial engineering focuses on relevant extensions of portfolio optimization to a variety of new problems such as long-term portfolio strategies with stochastic interest and inflation rates; real estate; commodity markets and foreign investment. Risk management and risk regulation are also among the topics studied at Labex MME-DII. The inadequacy of the risk management models developed in the 1990s has been revealed by the recent financial crisis. Accounting for market frictions, liquidity problems, contagion effects due to risk interdependence and discrete-time rebalancing of portfolios is essential in order to come up with better risk measures and to develop adequate statistical tools for their empirical assessment. A third direction of the research at Labex MME-DII deals with corporate finance issues and studies the conflict of interests between shareholders and managers, as well as between shareholders and creditors and their impact on risk-taking behavior, borrowing capacity and efficiency. Of related interest is the role of credit ratings agencies and firms’ credit quality in an international trade context, as well as the influence of bankruptcy laws on performance.

Topics in Finance and Risk Management:

  • Asset pricing
  • Derivatives
  • Financial engineering
  • Term structure of interest rates
  • Risk measures
  • Corporate governance
  • Portfolio management
  • Financial econometrics
  • Optimal capital structure
  • Real estate
  • Hedging
  • Extreme returns and market volatility
  • Market regulation
  • Mergers and acquisitions
  • Market microstructure
  • Behavioral finance

 Researchers with interest in Finance and Risk Management:

Michel Baroni (CERESSEC)

My research fields are mainly real estate risk measurement, property indices, derivative products and real estate portfolio management. Risk of direct real estate cannot be measured with classical tools, because of the peculiarities of the assets that are illiquid and unique. Constructing indices to measure the systematic risk needs to take into account these characteristics. Various methodologies are available but factorial analysis can provide a more robust estimation of volatility, a necessary condition to create derivatives. Real estate portfolio management must also include the specific risk due to vacancy, which is considered as the most important risk for the investors. Leases conditions and especially break options that can be exercised by the tenants must be modeled to describe the portfolio risk, and combining Monte Carlo simulations for prices and rents with the leases options can lead to an operational measurement of this risk.

Frédérique Bec (THEMA)

My research focuses mainly on non-linear time series econometrics (developments of new unit-root tests and of new models as MR-LSTAR or ACR or Bounce-Back augmented TAR or MS models) with applications to macroeconomics (forecasting, real exchange rates dynamics, investment inventory, inflation and oil price dynamics, shape of recoveries of business cycles, etc…) and finance (term structure of interest rates, long-run Value-at-Risk, stocks returns non-linear dynamics, etc…). My research interests include corporate governance mechanisms (especially ownership structures and boards of directors), mergers and acquisitions, and labor relations. A specific example: in a recent paper, we examine board structure in France, which since 1966 has allowed firms the freedom to choose between unitary and two-tier boards.  We analyze how this choice relates to characteristics of the firm and its environment.

Mondher Bellalah (THEMA)

I work mainly on asset pricing and derivatives valuation with incomplete information.

Annie Bellier (THEMA)

My research focuses in Small Business Enterprises and there are 4 main topics: – SME financing: credit rationing, determinants of contract termes on bank loans – SME rating: split rating – Business Angels financing in the SME development process – the link between corporate social responsibility and financial performance.

Fraçois Belot (THEMA)

My research interests include corporate governance mechanisms (especially ownership structures and boards of directors), mergers and acquisitions, and labor relations.

Juliana Caicedo-Llano (EPEE)

I am interested in two questions: how to measure financial risk and performance in portfolio management and how markets changes impact the construction of portfolio strategies. I use different techniques in quantitative analysis, financial econometrics, and computational finance to answers these questions and recently I have been interested in advanced signal and data processing methodologies.

Patricia Charlety (CERESSEC)

In the field of Financial Economics, the topics I study include: – Incentives for partial acquisitions of equity in competing firms and the consequences for competition, shareholders’ wealth, and welfare; – Consequences of partial acquisitions on the wealth of shareholders of firms involved in the operations and how it is related to the sector and the identity of the acquirer/acquired – Analysis of shareholders’ meetings : consequences of the rules on the outcome of the vote, the role of large/reference/controlling shareholders – Empirical analysis of the results of shareholder meetings in France.

Jean-Michel Courtault (CEPN)

I have worked on portfolio choice, risk-aversion and financial markets. I am currently writing papers on the bibliometrics of academia and on the sustainability of public finance.

Maximilien Demarquette (CEPN)

I am interested in market microstructure, especially in models concerning information linkages (networks), information leakage or information sales, in a competitive or a strategic financial framework. I am also interested in the understanding of collaboration among competitors in a broader setting.

Andras Fulop (CERESSEC)

My main research topics are centered on Sequential Monte Carlo (SMC) methods in Bayesian Econometrics and its financial applications to microstructure, credit risk and dynamic asset pricing models. My recent and ongoing work can be grouped along the following lines. (1) Econometric Methodology using SMC: In the years up to 2014 I have spent a considerable amount of my time developing new, massively parallel SMC algorithms for Bayesian estimation of general state-space models, well adapted to modern parallel computing infrastructures (clusters, GPUs). Such advances open the way to the rigorous analysis of models that were not tractable before. Currently I am working on adapting some of these techniques to simulation-based optimization, essentially providing a statistically well-founded population-based approach to simulated annealing. (2) Credit Default Swap (CDS) Market Microstructure: With Laurence Lescourret we have been working for quite a while on the microstructure and the effect of regulatory reforms on the liquidity of the corporate OTC markets which was at the epicenter of the great financial crisis. (3) Credit Risk: I have a couple of loosely connected projects with the common thread of modelling, estimating and measuring the credit risk of corporate and sovereign entities. -Estimation of Dynamic Asset Pricing Models: The general focus here is in applying the SMC methods discussed above to the estimation of dynamic asset pricing models.

Nathaniel Gbenro (THEMA)

Limit order book modelling

Imen Ghatassi (CEPN)

I do research mainly in asset pricing, broadly defined, with an emphasis on macro-finance models and consumption based asset pricing models. I recently started a project with N. Meddahi on the analysis of the effect of temporal aggregation on calibrating CCAPM models. Several previous papers addressed this issue, in particular Grossman, Melino and Shiller (1987), Hansen and Singleton (1996), and Bansal, Yaron and Kiku (2013). Often these studies assumed that the true frequency was given (e.g. monthly or continuous time) and then derived the implied restrictions at the frequency of data (e.g. annually). We follow a different approach by considering a miss-specified model of the frequency of data. Consequently, we consider a miss-specified model and we estimate the preference’s parameters of the wrong model. Importantly, for some popular models like CRRA with i.i.d. normal process for consumption growth, we are able to characterize analytically the mapping between the parameters of the wrong model at the low frequency and the parameters of the true model at the high frequency.

Tristan Guillaume (THEMA)

My main area of specialization is in the mathematical and numerical methods applied to the valuation and the hedging of contingent claims. I am particularly interested in boundary crossing problems and computational issues in high dimension.

Marianne Guille (LEMMA)

My current research focuses on individual sensitivity to money illusion, i.e. the tendency of people to think of money in nominal, rather than real terms or not correctly take into account the variation of prices – especially trying to characterize and measure money illusion at an individual behavioral level using experimental protocols. Other issues include first, the financing of R&D and innovation expenditure at the firm level, particularly the role of bank-debt in financing R&D and particularities of the financial structure of R&D firms, and second, specific features of defense firms in terms of behavior, financing or performance.

Andreas Heinen (THEMA)

Financial risk management with copulas, dynamic copulas, regime-switching copulas, canonical vine copulas, skew t copulas, spatial copula and credit risk in real estate. Microfinance: competition in microfinance and loan rates, profitability and social outcomes, and portfolio quality; borrower defaults and credit risk in microfinance; Accounting rules, prudential regulations and loan loss provisioning in banks. Small worlds in the boards of directors of stock listed companies

Donald Keenan (THEMA)

I do all manner of microeconomic theory. On a more applied side I have done extensive work in real estate, particularly the application of options theory to describe mortgage prepayment and default.

Mi Lim Kim (THEMA)

My research interests lie in housing market. Among many important issues related to housing market, first, I focus on default behaviors of mortgagors. My research is about analyzing the factors which lead default decision and default dependence of mortgagors. We then investigate whether taking into consideration those factors sheds light on the risk management of portfolio at the stage of making a portfolio. I am also interested in movement of housing prices according to government policies. My current research projects investigate the effect of educational policy on the real estate market.

Marie Kratz (CERESSEC)

Extreme value theory; Quantitative risk management; Gaussian random fields; Excursion sets

Joachim Lebovits (LEMMA)

I solve stochastic differential equations and establish stochastic calculus with respect to random processes.

Lionel Lecesne (THEMA)

I’m currently working on the impact of illiquidity on risk and performance of financial positions. In particular, my research work consists to define measures adjusted to liquidity risk.

François Longin (CERESSEC)

François Longin pursues a career in banking and finance by allying research, consulting and training. His thesis was about extreme movements in financial markets such as stock market crashes. For many years he has been working on the applications of extreme value theory to financial markets: the statistical distribution of extreme returns, the setting of margins in derivatives markets, the impact of financial regulation on market volatility, the improvement of portfolio management techniques during highly volatile periods, the computation of value at risk for market positions, the definition of catastrophe scenarios for stress testing… His research has been applied by financial institutions in the risk management area. He received the Chicago Board of Trade award for his research on derivative products. Some of his research works can be found in scientific journals such as The Journal of Finance, Journal of Business, Review of Financial Studies, Journal of Banking and Finance, Journal of Futures Markets, Journal of Derivatives. François is currently a financial consultant and his domain of expertise covers risk management for financial institutions, financial management for non-financial firms and wealth management for individuals. He also participates in the SimTrade project (pedagogical tool in financial market).

Fabien Mercier (LEMMA)

I have been carrying analytical and applied research in academia as well as for the European Central Bank. My research interest includes money illusion and behavorial finance, but lately has been focused on the setting up of credit risk models based on the loans backing European Asset Backed Securities, as well as on reviewing and assessing the current Common Eurosystem Pricing Hub methodologies for ABS.

Mohamed Mrad (LAGA)

Mathématiques finacières: Optimisation de portefeuilles, Utilités stochastiques, Flots stochastiques. BSDEs, Taux long terme, Ramsey rule. Probabilités numériques: compostion et décomposition numériques des champs aléatoires.

Nathalie Picard (THEMA)

I study individual and household decisions, focusing on interactions within families and between families, with the State and with the markets. My research is both theoretical and applied to various domains, including risk; finance; transportation; urban economics; sustainable development; education; development economics; labor supply; real estate markets; residential and professional location.
The main objectives are to understand individual and household behavior and to develop methods to better evaluate public policies. The tools used include pure theory, risk analysis, collective models, microeconometrics, structural econometrics, discrete choice models, experimental economics, behavioral finance. Beside pure academic research, I am also interested in the dissemination of research results, both towards the public and the private sectors. In this spirit, I regularly conduct or participate to research grants, which combine high level research and interaction with the real world, on topics of interest for the society, such as: employment, housing, transport infrastructures, urban development

Patrice Poncet (CERESSEC)

My research interests fall into 4 categories: monetary theory (money non-neutrality), theory and tests of asset pricing models (in particular using asset return predictability), delegated portfolio management (optimal benchmarking, compensation schemes, alpha generation) and optimal corporate capital structure (using debts with different priorities and/or loss-absorbing debts).

Jean-Luc Prigent (THEMA)

My main topic is the study of Finance: portfolio optimization and in particular structured portfolio management; option hedging and pricing in the presence of jumps; risk management; financial econometrics.

Nathalie Rey (CEPN)

My research activities revolve around three main themes. 1. The restructuring of the banking sector and insurance. I am interested particularly in the legitimacy of the intervention of the State in the financial system. The intervention can be done directly through the public financial sector, and indirectly by law, regulation and control. 2. The development and the role of financial innovations and financial risk and more specifically the credit risk. I am interested in innovative models of evaluation of financial assets and quantification of financial risks. The main contribution of these models would be a better estimate of the assets and risks through the introduction of long-term macroeconomic variables.
3. The behavior of investors and portfolio management.

Andrea Roncoroni (CERESSEC)

I am mostly interested in the use of financial tools and quantitative models for managing financial and physical risk exposure of corporates. In this respect, I put forward the Threshold Model for price simulation in spiky electricity markets, and devised FloRisk Metrics, an effective analytics
to monitor and manage corporate financial exposure.

Stéphanie Serve (THEMA)

My research interests include public finance and corporate finance, with a recent focus on the following areas: universities financing issues, delistings, and SME financing issues (multiple banking, credit scoring).

Ibrahima Soumare (THEMA)

I work on default risk modeling issues and contagion models in finance, in particular on the theory and application of copula in default templates.

Roméo Tédongap (CRESSEC)

I currently work on asymmetric investors’ attitude towards risk in the presence of macroecomic uncertainty and systemic changes, and their implications for asset pricing and portfolio choice. From this end, I am interested in estimating asset pricing models incorporating downside risks, and analyzing the market premia inherent to investing in securities such as stocks, bonds, options, commodity and energy derivatives, and credit derivatives swaps.

Fabien Tripier (EPEE)

My research interests lie in the field of macroeconomics with a focus on business cycles, financial markets, and labor economics.

Radu Vranceanu (CERESSEC)

Radu Vranceanu has an interest in models with imperfect information as applied to financial crises, the labor market, the academic publication market, communication strategy, etc. He takes some of these research topics to the Lab, to analyze lying strategies, contagion in asset markets, team production, dynamic public good games, group decision, etc.