Tag: WFA-CFAR

Since 2016, Jian Cai, a senior lecturer in finance at WashU Olin, has advised student practicum teams through the Wells Fargo Advisors Center for Finance and Accounting Research (WFA-CFAR). In a discussion with Tatiana Vdovina, a CFAR PhD Scholar and PhD candidate in finance, Cai talked about the challenges and rewards of guiding students through real-world consulting projects:

What types of companies have you advised in quantitative finance and fintech?

When the practicum program was still in an early stage, two teams consulted with Build-a-Bear (Workshop). In the first year, the company wanted to figure out how to improve their supplies purchasing process. The next year, a team of seven worked on a post-audit analysis of their newly opened stores and presented it to the CFO and an executive committee. Both teams were invited to their flagship store at the Galleria Mall and built our own bears!

Our next client was Detalus, a local investment company. The main project we did with them was to establish a red flag system that would indicate when a company they invested in was predicted to have a credit rating downgrade.

We completed four projects with Neocova, a local startup fintech firm that provides AI services to community banks. (Among those projects were) a predictive model for community banks’ credit rating and an anti-money laundering (AML) model.

Most recently, my team worked with MARKIT/S&P Global Market Intelligence to evaluate the market potential for loan-level probability of default and loss given default modeling. The team won the Quantitative Finance Practicum Showcase because of the sophistication of our analysis and modeling.

What are the biggest challenges you face with a team of master’s students during a 14-week practicum?

For all projects, the first challenge is to translate a business situation or issue the client wants to address into a tangible research question. Most students have not had any industry experience by the time they work on the project. With a lot of motivation and strong technical skills, students tend to be eager to start on data analysis and coding before seeing the actual purpose of the project. So I try to pull them back and help them see the big picture first.

While every semester and every project is different, one thing that is always the same is that time goes by very fast and we need to keep track of the timeline and project scope constantly.

What gives you the most satisfaction in advising student practicum teams?

Being able to solve a seemingly impossible problem makes me happy and intellectually inspired!

For the community banking project (for Neocova), I felt stuck not knowing how to show (that) a group with perceived low credit quality actually has strong creditworthiness. One of our faculty members (the late Radha Gopalan) suggested developing a credit rating predictive model using data we had on rated banks, then making projections on mostly unrated community banks. Thanks to his brilliant idea, we were able to solve the problem proposed by the client quickly.

Ultimately, hearing from students years later and seeing their careers take off makes me happy.

Three students in the most recent practicum team I advised (for S&P) found nice jobs within three months after completing the project. One is now at Morningstar in New York, and another is working at Goldman Sachs. Starting their careers with the experience that they got from the project is awesome to observe.

Read Cai’s full interview and learn more about how student practicum projects have translated into hands-on student experience while providing tangible business benefits to clients.

Pictured at top: Jian Cai’s student practicum team, which worked on projects for Build-A-Bear Workshop, celebrated with newly made stuffed toys.

He’s against breaking up big banks. He doesn’t favor a return to Glass-Steagall’s separation of commercial and investment banking. And he’d like to see most of the Dodd-Frank Act dismantled. William Cohan made it clear at the second annual Wealth & Asset Management Conference at Olin that he’s against tight regulation of the finance industry where he spent most of his career.

Cohan was a headline speaker at the conference sponsored by the Wells Fargo Advisors Center for Finance and Accounting Research held Aug. 22-23. Cohan’s current career involves writing books about how big finance works behind the headlines. Cohan discussed his latest work, Why Wall Street Matters, with Rich Ryffel, senior lecturer in finance.

So, how would Cohan propose preventing the next financial crisis if regulation won’t help? David Nicklaus at The St. Louis Post-Dispatch covered their conversation in his Aug. 25 column:

Cohan proposes that the top 500 or so executives at each big bank be required to pledge their entire net worth as backing for the firm’s liabilities. They could still earn bonuses and stock options when things were going well, but another bad bet like subprime mortgages could cost them everything.

“It’s in the DNA of Wall Street to have your own skin in the game,” Cohan says. “You’re not going to take Goldman Sachs or Wells Fargo private, but my idea would recreate some of the old partnership structure.”

As the world learned in 2008, a global financial crisis can happen when economists least expect (or predict) it. But according to Gary Gorton, finance professor at Yale’s School of Management, it will happen again. He estimates the next crisis will come in 10 to 15 years. Gorton shared his analysis of the 2008 financial crisis at an event sponsored by the Wells Fargo Advisors Center for Finance and Accounting Research at Olin, Aug. 16.

Gorton will address the Finance Theory Group Summer School, meeting at Olin this week, at 9 a.m., Friday, Aug. 18, in Emerson Auditorium, Knight Hall. His topic will be: “The Private Money View of Financial Crises.”

Gorton’s 2010 book, Misunderstanding Financial Crises, Why We Don’t See Them Coming, provides historical context for understanding the 2008 financial crisis and why economists and policy makers need to recognize that crises are inevitable and inherent to our financial system. To those who thought that a crisis could not happen again in the US after the Great Depression, Gorton is blunt: “That economists did not think such a crisis could happen in the United States was an intellectual failure.”

Unlike the 1929 crash with bank runs like the scene in the Frank Capra film, “It’s A Wonderful Life,” the causes of the 2008 crisis were less visible. Cloaked in electronic trading, complex financial ‘innovations’, and unregulated derivative securities trading within the Shadow Banking system, Gorton said economists were blind to what was really happening in the financial markets.

Gorton points to the lack of data available from financial institutions as a major handicap for economists and policy makers who need to track activity to more accurately understand the markets and see signs of crisis before it’s too late. Gorton calls for a new information infrastructure to be built by the Office of Financial Research established under the Dodd-Frank legislation. He argues collecting and sharing data would help regulators as well as economists to more accurately measure risk and liquidity in the markets.

Gary Gorton and Rich Ryffel, Olin Senior Lecturer in Finance

Bio
Gary B. Gorton is The Frederick Frank Class of 1954 Professor of Finance at the Yale School of Management, which he joined in August 2008. Prior to joining Yale, he was the Robert Morris Professor of Banking and Finance at The Wharton School of the University of Pennsylvania, where he taught from 1983 to 2008. Dr. Gorton has done research in many areas of finance and economics, including both theoretical and empirical work. He is the author of Slapped by the Invisible Hand: The Panic of 2007 (Oxford University Press) and Misunderstanding Financial Crises (Oxford University Press).

Dr. Gorton has consulted for the U.S. Board of Governors of the Federal Reserve System, various U.S. Federal Reserve Banks, the Bank of England, the Bank of Japan, and the Central Bank of Turkey. He was a consultant to AIG Financial Products from 1996 to 2008.

Dr. Gorton received his doctorate in economics from the University of Rochester. In the field of economics, he received master’s degrees at the University of Rochester and Cleveland State University, and also received a master’s degree in Chinese Studies from the University of Michigan.

Jim McKelvey, entrepreneur and co-founder of Square, will be the keynote speaker at the Second Annual Wealth and Asset Management Research Conference to be held at Olin Aug. 22-23, 2017. Hosted by the Wells Fargo Center for Finance and Accounting Research (WFA CFAR), the meeting brings together researchers and practitioners who share the common goal of better understanding the capital markets to create better outcomes for investors. The conference will feature research from leading academics with audience discussions lead by industry experts in each given field of research.

McKelvey was appointed as an Independent Director of the St. Louis Federal Reserve in January 2017, but is better known for his involvement in several St. Louis-based startups including Cultivation Capital (general partner and co-founder), Six Thirty (co-founder), LaunchCode (founder), Third Degree Glass Factory(co-founder), Mira publishing (founded when he was a WashU student), and Square, the mobile payment company he founded in 2009 with Jack Dorsey.

McKelvey graduated from Washington University in 1987 with degrees in Economics and Computer Science. Earlier this year, he donated $15M to the University to build a new computer science and engineering building named in honor of his father, James McKelvey, Sr. who is a former dean of the School of Engineering and Applied Science.

In addition to research topics, the one-and-a-half-day conference will feature presentations by noted industry experts including attorney Jerry Schlichter, and author William Cohan.

Link to register.
Sessions will be held in Emerson Auditorium, Knight Hall.

Conference Schedule:

Tuesday, August 22, 2017

12:00 – 1:00 pm  Registration – Knight Hall, Frick Forum1:00 – 1:15 pmWelcome & Opening Remarks Richard Ryffel, Senior Lecturer in Finance, Washington University

1:15 – 2:00 pm  Presenter – Bob Dannhauser, Head, Global Private Wealth Management, CFA Institute, “The Art and Science of Wealth Management: Looking to the Future”

2:15 – 3:00 pm  Presenter – Dan Bergstresser, Associate Professor of Finance, Brandeis International Business School, “Changes in the Municipal Bond Landscape since the Global Financial Crisis”

Discussant – Linda Matkowski, Chief Operating Officer, Stern Brothers & Co.

3:00 – 3:45 pm  Presenter – Andy Kalotay, President, Andrew Kalotay Associates, “Tax Optimization of Municipal Bond Portfolios”

Discussant – Steve Wood, Principal, Stephen A. Wood Consulting, LLC

4:00 – 5:00 pm   “Remembering Steve Ross: The Man and His Ideas” – Phil Dybvig, Boatmen’s Bancshares Professor of Banking and Finance, Washington University, Rick Antle, William S. Beinecke Professor of Accounting, Yale University, Michael Griswold, Senior Director, Risk Managment and Asset Allocation, Ascension Investment Management

Wednesday, August 23, 2017

8:00 – 9:00 am
A Discussion of the Importance of Financial Services to the Economy – William Cohan, Author,  “Why Wall Street Matters“

9:15 – 10:00 am   Presenter – Jerry Schlichter, Founding and Managing Partner, Schlichter, Bogard, & Denton, “Litigation Pitfalls for 401k Plan Fiduciaries”

10:15 – 11:00 am   Presenter – Matt Ringgenberg, Associate Professor of Finance, David Eccles School of Business,  “On Index Investing”

Discussant – Hans Fredrickson, CIO, Oak Summit Capital

11:00 – 11:45 am   Presenter – Todd Gormley, Associate Professor of Finance, Washington University, “Standing on the Shoulders of Giants: The Effect of Passive Investors on Activism”

Discussant – Charles Stucke, Chief Executive Officer, Lepercq

12:00 – 12:45 pm   Presenter – Emily Gallagher, Postdoctoral Research Associate in Household Finance, Washington University, “Financial Challenges of Low-Income Households”

Discussant – Chris Krehmeyer, President and CEO, Beyond Housing

2:00 – 2:30 pm   FinTech Showcase – Presenter – Cliff Holekamp, Senior Lecturer in Entrepreneurship, Academic Director for Entrepreneurship “How Venture Capital Pays”

2:30 – 3:30 pm   FinTech Showcase Panel – Ben Harrison, Chief Revenue Officer and Co-founder, DealCloud, Inc., Josh Smith, Co-founder and CEO, Solovis, Laurence Stock, COO and Co-founder, Numerated Growth Technologies, Inc., “Automation in Asset Management”

Moderator – Joe Maxwell, Managing Partner, Cultivation FinTech

3:30 – 4:15 pm  FinTech Showcase – Keynote Address – Jim McKelvey, General Partner and Co-founder, Cultivation Capital, Co-founder and Director, Square.

I was not expecting to receive a job when I applied for the Wells Fargo Advisors Center for Finance and Accounting Research (WFA-CFAR) mentorship program for Master of Accounting (MACC) students during the Spring 2016 semester. Instead, I was hoping to build a healthy long-term friendship with my future mentor. The friendship should benefit both sides: my mentor could learn Chinese culture from me, and I could learn how to behave more professionally in the US business world.

The mentorship experience with Doug Schoen, Assistant Treasurer at Emerson, turned out to be wonderful, and it is exactly what I was hoping for. During several dinners with Doug’s family at his home, they generously taught me many soft skills for the business world; for example, how to handle crucial conversations effectively and how to become a better team leader. Doug also took me on a tour at Emerson, and he introduced me to Emerson’s VP and the Director of Treasury–and each of them gave me sincere and beneficial advice for my career.

The new WFA-CFAR mentorship program for MACC students is making a personal and professional impact.

As I had hoped, Doug and I also taught each other new things. For instance, I bought Sake wine and taught Doug how to taste and identify different Japanese Sake. In return, Doug sent me books on art history, and he guided me through different oil paintings in different eras.

While both of us were enjoying the mentorship experience and learning from each other, good news came: I was offered an accounting internship at Emerson this summer because of my previous contact with Emerson’s senior management team. I joked with Doug that the internship was a “bonus” in this friendship.

We have already planned another event in the future–probably a Cardinals baseball game, and my mentor will teach me rules of this sport. I strongly recommend that students participate in mentorship programs such as this. Thanks to WFA-CFAR and Doug, I already know what a home run feels like!

Guest Blogger: House Zhu (MACC 2016)