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Results tagged “Anthony Saunders” from Risk Intelligence News Center

Anthony Saunders & Coauthors Win Fama-DFA Second Prize

By
Laura Shanley
on June 4, 2012 11:14 AM |
A paper coauthored by MSRM professor Anthony Saunders of NYU Stern, Nadia Massoud of York University, Debarshi Nandy of Brandeis University and Keke Song of Dalhousie University won the Fama-DFA Second Prize for Capital Markets and Asset Pricing. This award is given by the Journal of Financial Economics.

Abstract of "Do Hedge Funds Trade on Private Information? Evidence from Syndicated Lending and Short-Selling"

This paper investigates important contemporary issues relating to hedge fund involvement in the syndicated loan market. In particular, we investigate the potential conflicts of interest that arise because of the absence of regulations relating to hedge funds' dual holdings of loans and short positions in the equity of borrowing firms. We find evidence of possible short-selling on private information in the equity of the hedge fund borrowers prior to the public announcements of both loan originations and loan renegotiations (amendments). In addition, our results show that hedge funds are more likely to lend to highly leveraged, low credit quality firms, where access to private information is potentially most valuable and where trading on such information can lead to greater profits. Overall, our results have important implications for the current debate regarding regulation of the hedge fund industry.

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Financial Architecture, Systemic Risk and Universal Banking

By
Laura Shanley
on May 4, 2012 9:16 AM |
NYU Stern Finance Professors Anthony Saunders and Ingo Walter published an article in the January 2012 edition of Financial Markets and Portfolio Management. "Financial Architecture, Systemic Risk and Universal Banking" explores sources of risk in the financial services sector and regulatory options available for systemically important financial institutions.

Full Abstract:

Consolidation has been a fact of life in the wholesale financial services sector, resulting in fundamental change in the financial architecture and public exposure to systemic risk. The underlying drivers include advances in transactions and information technologies, regulatory changes, geographic shifts in growth opportunities, and the rapid evolution of client requirements, which in combination have obliged financial firms to rethink their roles as intermediaries. Moreover, financial sector reconfiguration has accelerated as a result of the global market turbulence that began in 2007, with governments either forcing or encouraging combinations of stronger and weaker financial firms in an effort to stem the crisis and improve systemic robustness. In the process, financial firms that are "systemic" in nature and had a major role in creating the crisis have come out of it with even larger market shares and greater systemic importance. Given the episodic socialization of risk in the form of widespread use of public guarantees to firms judged too big or too interconnected to be allowed to fail, the role of systemically important financial institutions (SIFIs) is central to the financial architecture and the public interest going forward. This survey paper considers the sources of systemic gains, losses and risks associated with SIFIs in historical context, in the theoretical and empirical literature, and in public policy discussions--i.e., what is gained and what is lost as a result of the available policy options to deal the dominant role of SIFIs in the financial architecture?

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