Tuesday, April 27, 2010

Econometrics workshop

The third workshop of our thematic program took place at Fields last week. The focus was Financial Econometrics, and the organizers, led by Yacine Ait-Sahalia, treated us with a stellar line up of 32 speakers spread in two days of talks, including the third lecture in the Distinguished Lecture Series by Darrell Duffie.

As a result, each speaker (apart from Darrell) had to give a 20 minutes talk, which forced them to focus on the important results and cut back on introductory remarks or generalities. I can't think of a better way to provide a broad overview of a very dynamic area of research. The downside of course is that there is no way I can review every single talk as I did for the other two workshops, so I'll restrict myself to the following highlights:

- Robert Engle described a measure of the systemic risk associated with an individual bank. This was developed at NYU and is updated regularly and made available on the web for investor and regulators. I pointed out to him that he should change the name of measure from Marginal Expected Shortfall to Marginal Expected Systemic Shortfall, since MESS is a much better description of what goes on in the financial system. He can thank me for that when he gets his next Nobel Prize.

- Andy Lo proposed different levels of uncertainty, extending the well known distinction made by Knight between risk and uncertainty to a finer classification. His application of the idea to a physical problem (the harmonic oscillator), was entertaining, since ideas usually flow from physics to economics, but rarely the other way around.

- Jean Jacob gave an impeccable presentation using only chalk and blackboard and got a round of applause when he said that he never managed to learn powerpoint (that alone was worth attending the entire workshop).

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