Turnbull Brings Researchers and Practitioners Together To Discuss Derivatives Securities
Back when Professor Stuart M. Turnbull was teaching in the business school at Queen’s University in Kingston, Ontario, he noticed that academia had a tendency to ignore derivatives securities, a field near and dear to his heart.
Most scholarly conferences would devote perhaps one session to the topic. “I found that just unsatisfactory,” says Turnbull, who is now a chaired professor at the University of Houston’s C. T. Bauer College of Business. “So I said, ‘Look, why don’t we have a conference?’ ”
This month, Turnbull’s Derivatives Securities and Risk Management Conference celebrates its 23rd anniversary. “I never thought it would last 23 years,” the professor says of the March 15-16 event in Arlington, Va.
Shortly after founding the conference, Turnbull was joined by colleague Robert Jarrow of Cornell University, and today the conference is co-sponsored by Bauer College, Cornell’s Graduate School of Management and the Federal Deposit Insurance Corporation’s Center for Financial Research.
It is a meeting of some of the best minds in the field — practitioners, regulators and scholars — and an opportunity for students to gather ideas from senior researchers.
Thus, scholars from as far away as Europe and Australia will mingle with FDIC and Federal Reserve Bank officials during the two-day affair at the FDIC’s L. William Seidman Center outside Washington, D.C.
In all, 18 papers will be delivered in the following categories: Credit Default Swap Markets; Term Structure and Credit Risk; Credit and Contagion Risk; FX and Commodity Markets; Volatility Risk; and Market Microstructure. Another segment will be devoted to Selected Topics in Theory. Among the big-name conference contributors are Jarrow; Jing-zhi Huang of Penn State University; Paul Glasserman and Pierre-Collin Dufresne of Columbia University and Robert S. Goldstein of the University of Minnesota.
Turnbull, one of the foremost derivative security pricing experts in the world, believes practitioners and scholars need conferences like this so they can talk to one another.
“Practitioners don’t have time to do the fundamental research,” the Finance professor says. “However in another direction, practitioners are in fact a lot more sophisticated than academics, so what we try to do is always bridge this gap between the two communities.”
Regulators are vital to the discussion, too, he said. “They must understand what the issues are and how they can be used and misused.”
If the topics on the agenda seem lofty, they nonetheless affect all our pocketbooks on a daily basis. Just look at how Europe’s debt crisis has roiled American markets. The distress, Turnbull points out, started in the relatively small nation of Greece and has now spread to Italy, Europe’s third largest economy. “This whole area of contagion is extremely important, and yet it’s unbelievably difficult to actually do the estimation,” Turnbull says.
Credit default swaps are also affected by contagion. “If one company defaults, how does that affect other companies?” Turnbull asks. “If you look at some the failings of some of the credit agencies, it really was because they had little idea how to model contagion. And so trying to stimulate more research into this area is actually very important.”
Turnbull compares the conference to a market. Papers represent sample-size information. If anyone wants a larger helping, the work is posted online. “We get to see lots of interesting things, and ones you might actually want to invest in you can do further research in. You may be using one approach, but someone else is working in the same area but taking a different approach.”
By Wendell Brock