Place: Chauvenet 216
Time: Thursday, February 4, 7:00-8:00pm
Speaker STEPHEN A. ROSS, Co-chairman of Roll and Ross Asset Management
Corporation
Franco Modigliani Professor of
Finance
and Economics at MIT
Title: Forensic Finance
Abstract: In finance, as in pathology, we can learn more from failure than from success. This paper exhumes three famous financial failures, the Hunt Brothers silver ventures, Metallgesellschaft's oil futures losses, and the recent LTCM and related hedge fund failures. We do a post mortem on each and see what we can learn. Not surprisingly, the cause of death was similar in each case, or, to put it more familiarly, those who pay no heed to history are doomed to repeat it.
Everyone is invited. A reception with refreshments for midshipmen will follow the talk.
Professor Ross is the author of more than 75 articles in economics and finance and is the coauthor of an introductory textbook in finance. He received his B.S. with honors from CalTech in 1965 where he majored in physics, and his Ph.D. in economics from Harvard in 1970. While he has worked on a variety of topics in economics and finance, he is probably best known for having invented the Arbitrage Pricing Theory and the Theory of Agency, and as the codiscoverer of risk neutral pricing and of the binomial model for pricing derivatives. Models developed by him and coworkers, including term structure models and option pricing models, are now standards for pricing in major securities trading firms. He has been the recipient of numerous prizes and awards including the Graham and Dodd Award for financial writing, the Pomerance Prize for excellence in the area of options research, the University of Chicago's Leo Melamed Prize for the best research by a business school professor and the 1996 IAFE Financial Engineer of the Year Award. A Fellow of the Econometric Society and a member of the American Academy of Arts and Sciences, he currently serves as an Associate Editor of several economics and finance journals and in 1988 was President of the American Finance Association.
Roll and Ross is one of the leading quantitative financial management firms in the world, and it is the leading firm applying the APT (Arbitrage Pricing Theory) invented by Ross and developed in collaboration with the other principal of the firm, Professor Richard Roll of UCLA. Its clients include major international corporations, government groups and mutual funds. Roll and Ross uses its extensive proprietary software to manage client accounts with a variety of objectives and techniques ranging from completion funds to dynamic portfolio programs including currency hedging and futures positions. The company currently has approximately $3 billion in domestic and foreign assets under management singly and in association with Daiwa Securities in Japan, Fortis (Mees-Pierson) in the Netherlands, and the Dallah Al-Baraka Group in Saudia Arabia. Roll and Ross manages funds in all of the major world markets.
Professor Ross has been a consultant to a number of investment banks, including Morgan Guaranty, Salomon Brothers and Goldman Sachs - where he served as the senior consultant for commercial real estate - as well as for many major corporations, such as AT&T and General Motors. Professor Ross has been retained as an expert advisor, including, for examples, AT&T in the breakup, Bunker and Herbert Hunt in litigation involving the silver market and for Metallgesellschaft. In addition, he has served as an advisor to government departments such as the U.S. Treasury, the Commerce Department, the Internal Revenue Service and the EXIM Bank. He is a former chairman of the American Express Advisory Panel, and a former director of General Re, and is currently a member of the board of directors of TIAA/CREF, Algorithmics, Inc., and Freddie Mac, and is a trustee of CalTech.