Risk Tales and Tail Risks

Risk Tales and Tail Risks

April 28th, 2022

12:00 - 1:30 PM Eastern

Stagflation? Russian exposure? Global supply chain issues? Managing a portfolio in the presence of economic and geopolitical uncertainty involves identifying potential scenarios, evaluating their market impact, and understanding their elusive and possibly non-linear effects on investment strategies. In this seminar, the speakers will consider:

• Identifying current market vulnerabilities
• Building forward-looking scenarios of potentially material events
• Quantifying portfolio exposure to market stresses, both slow and fast moving

Sessions: 

Asset Pricing and the Four Horsemen of the Investment Apocalypse (War, Pandemic, Corruption, and Climate Change)

Dan DiBartolomeo, Founder, Northfield Information Services

Recent events including the COVID 19 Pandemic and the Russian invasion of Ukraine have brought renewed attention to the impact of “large events” on investor behavior and the valuation of assets.  The presentation will begin with a review of the empirical literature on the financial market influence of major events, both fast moving (war, pandemic) and slow moving (corruption, climate change). The second part of the presentation will propose a revision of the Capital Asset Pricing Model which accounts for investors paying special attention to large events, while being relatively indifferent to small differences in risk across assets. This new model seems to explain many aspects of empirical asset pricing such as the large equity risk premium and a low slope of the Security Market Line. The presentation will conclude with an analysis showing that that realized returns to many popular factor investing themes such as Value, Momentum, and Quality look very different when viewed from the perspective of the new model.    

Developing a Scenario Response Curve

Rick Bookstaber, Co-Founder & Head of Risk, Fabric

Risk is the pulse of life. In his talk, Rick Bookstaber will describe a risk management technique for building forward-looking scenarios of material events. The multi-step approach includes 1) Monitoring the market for catalytic events, 2) Developing an out-of-sample market response to the catalyst based on historical analysis, 3) Assessing the current leverage, liquidity, market concentration, and credit conditions of the marketplace to understand whether markets are vulnerable and, 4) Expressing the scenario using the risk-factors in a factor simulation model. Forward scenarios are a critical aspect of our risk assessment framework, allowing users to envision the impact of future events that are both extreme and plau- sible given the current state of the markets.     

Speaker Bios:    

Dan DiBartolomeo  Founder, Northfield Information Services 

Mr. diBartolomeo is President and founder of Northfield Information Services, Inc.  He sits on boards of numerous industry organizations including IAQF and CQA and is a director and past president of the Boston Economic Club. His publication record includes more than forty books, book chapters and research journal articles. In addition, Dan spent eight years as a Visiting Professor at Brunel University and has been admitted as an expert witness in litigation matters regarding investment management practices and derivatives in both US federal and state courts.  He became editor in chief of the Journal of Asset Management at the start of 2019.     

Rick Bookstaber  Co-Founder & Head of Risk, Fabric 

Rick Bookstaber is a noted expert in financial risk management, and is the author of The End of Theory (Princeton, 2017), and A Demon of Our Own Design (Wiley, 2007). He is the co-founder of Fabric RQ, a platform for providing risk management to wealth managers and asset owners.

His career has spanned chief risk officer roles on both the buy side at Moore Capital and Bridgewater, and on the sell side at Morgan Stanley and Salomon. From 2009 to 2015 Rick served in the public sector at the SEC and the U.S. Treasury, drafting the Volcker Rule, building out the risk management structure for the Financial Stability Oversight Council, and developing an agent-based model to assess financial vulnerabilities. Most recently he was the Chief Risk Officer in the Office of the CIO for the University of California, with oversight across its $160 billion pension and endowment portfolios.

His various roles have put him at the center of the critical crises of the last three decades – working with portfolio insurance during the 1987 Crash while at Morgan Stanley, overseeing risk at Salomon during the 1998 failure of Long-Term Capital Management (dubbed “Salomon North”), and with the aftermath of the 2008 Crisis while in the regulatory sphere. 

A black belt in Brazilian jiu jitsu, Rick can be found training at the Renzo Gracie Academy in his free time. Rick received a Ph.D. in economics from MIT.

Pricing:

• Members: $10.00
• Non-members: $25.00
• Students: Free