From the Director

As the nation’s worst financial and economic crisis enters its 3rd year, a sense of optimism that reflects the stabilization of the financial sector seems to pervade the country. Yet the stock market is down over 40% from its high in October 2007. Short term rates remain low as the Fed tries to stimulate lending. Economic conditions have worsened with unemployment rising to 9.5%. Federal spending is exploding and new entitlements are likely to bring about a permanent increase in the Federal budget. The country has managed to turn a financial crisis into an economic crisis with long run problems to boot.

This past year the Center held two special conferences that dealt in part with the current financial crisis. On October 16-17, 2008, the Center sponsored a conference on Financial Innovation: 35 Years of Black/Scholes and Merton, with the help of sponsors, CBOE, CME, Options Clearing Corporation/Options Industry Council, and Susquehanna. The conference honored Black/Scholes and Merton for developing the option pricing model, a model credited with giving rise to the tremendous growth in derivatives. A short discussion of the conference and pictures are elsewhere in this newsletter. Our spring conference, held on April 18, 2009, was also devoted to a special celebration – Dewey Daane’s 90th birthday. It is the second conference given in expectation of Dewey’s retirement. The first was in 1989, exactly 20 years ago. Neither has convinced Dewey that it is, in fact, time to retire. The conference itself dealt with the current financial crisis as policy makers analyzed the causes and cures for the economic collapse.

As usual there have been some comings and goings of Center faculty associates. Joining the finance faculty this year will be Miguel Palacios, who has just completed his PhD degree at Berkeley. He is an expert on human capital, and his dissertation incorporates human capital in an asset pricing model. Visiting faculty include Kate Barraclough, who is visiting for a third year and teaches derivatives and bond markets , and Nicole Branger, who is a professor at the University of Muenster and visits every other year to teach the course on advanced derivatives.

Upcoming events at the Center include a conference on “The role of government regulation in corporate finance” that is being organized by Center associate, Alexei Ovtchinnikov, and that will take place on October 10, 2009 at Vanderbilt. The Center intends to sponsor a research conference each fall in the future to supplement the spring conference. This conference is the first in that series. The objective is to invite researchers on a particular topic to present their papers and discuss further research possibilities. The spring 2010 conference is scheduled for April 22-23, topic yet to be determined.