Dr. P.V. Viswanath

pviswanath@pace.edu

Financial Innovation
Assignments, Summer 2007

• Articles for reading and discussion
  Assignments must be read ahead of class; you must be ready for discussion. At times, I will ask you to submit written answers to questions.
• Presentation Assignments

Articles

Risk Sharing

• Allianz issues Cat Bond , WSJ, April 11, 2007
  • What sorts of investors are buying Allianz's cat bonds? What sorts of mutual fund managers would be among the cat bond investors? Can you think of other investors, who are not listed in the article?
  • Why have these cat bonds not been issued to the general public?
  • Other readings:
    • First cat bond ever to cover flood
• Behind Buyout Surge, A Debt Market Booms: CLOs Spark Worries Of Volatility and Risk; Loan Standards Loosen, WSJ, June 26, 2007
• Vanguard Makes Second Filing for "Actively Managed ETFs," WSJ, June 27, 2007

Securitization

• Accounting Said to Hide Lender Losses, New York Times, May 1, 2007
  (If the above link doesn't work, try clicking on this link. If that doesn't work, you can also find this article by going to http://library.pace.edu, then clicking on "Databases" under Find Resources -- first column -- then choose New York Times (Lexis-Nexis) from Complete Database Listing and Search by keywords from article title -- viz, accounting, lender and losses.)
• How Wall Street Stoked the Mortgage Meltdown, WSJ, June 27, 2007, page A1
• Article on movie revenues securitization: LA Firm Bets on Hollywood Ending for Profit Deals, WSJ, June 27, 2007, page C1
  

Information Asymmetry and Moral Hazard

• At the risky end of finance, Economist, April 19th, 2007
  (If you don't subscribe to the Economist, the link above won't work; however, you can also find this article by clicking on this link. If that doesn't work, you can also find this article by going to http://library.pace.edu, then clicking on "Databases" under Find Resources -- first column -- then choose ABI Inform from Complete Database Listing and Search by keywords from article title -- viz, risky end and finance.
• “The Cash-Back Mortgage,” by Stephen Dubner and Steven Levitt, June 10, 2007, NY Times

 

Macroeconomic Effects

• Innovative Trade Financing Expands US Pool of Lenders and Market for Machinery Export by Richard Barovick, World Trade, April 2007, vol. 20, no. 4, p. 19 ff.
  (You can also find this article by going to http://library.pace.edu, then clicking on "Databases" under Find Resources -- first column -- then choose ABI Inform from Complete Database Listing and Search by keywords from article title -- viz, "innovative trade financing.")

Presentation Assignments:
These articles can be found on Blackboard under Documents in Part II of the Finance section
Articles marked ** have already been selected by a team -- make your selection from the remaining articles.

1. **"Financial Innovation and Financial Stability: Striking a Balance," speech given by Eduardo Aninat, Deputy Managing Director, International Monetary Fund at the CEPALC International Conference, Towards Regional Currency Areas at Santiago, Chile, on March 27, 2002
2. "Innovation in finance – and how Europe can be at the leading edge," speech by Charlie McCreevy, European Commissioner for Internal Market and Services at the 7th Annual Finance Dublin Conference at Dublin on 28-29 March 2005.
3. "Financial Innovation, Monetary Policy and Financial Stability," speech given by Mr. Christian Noyer, Governor of the Banque de France, at the Spring Conference of the Banque de France/ Deutsche Bundesbank at Eltville, on 27/28 April 2007.
4. "Has Financial Development Made the World Riskier?" by Rajan Raghuraman, European Financial
   Management, 12 (4), 499-533 (2005).
5. **"How do Financial Systems Affect Economic Cycles." Chapter 4, pp 105-138, World Economic Outlook, published by the IMF (September 2006).
6. "Information Asymmetry and Trust: A Framework for Studying Microfinance in India," by M.S. Sriram, Vikalpa, vol. 30, no. 4, October-December 2005.
7. "The Great Reversals: The Politics of Financial Development in the 20th century," by Raghuram G. Rajan and Luigi Zingales, Economics Department Working Papers no. 265, October 2000.
8. Financial Innovations for Accelerating Medical Solutions
   A report from the Milken Institute that discusses ways of speeding up the generation of solutions to medical problems by improving access to financing.
9. Financial Innovation, Working Paper, Harvard Business School, by Peter Tufano.