Welcome to EITA-Business and Management 2008
The First Annual ** EITA Business & Management ** Workshop
(EITA-B&M 2008: Emerging Financial Services)
“Subprime Crisis and Wall Street Technology”
Taipei Economic and Cultural Office in New York
1 East 42nd Street, New York, NY 10017
Friday, September 5, 2008
During 2006-2007, housing prices in some parts of US began to fall. Defaults and foreclosures began to increase in the subprime sector as ARM interest rates reset higher. Refinancing became increasingly difficult. And then, in an enigma that will puzzle the financial markets for years to come, troubles initially thought to be limited only to the subprime sector eventually unfolded into a full-blown global financial crisis in a classic vicious cycle of asset devaluation and liquidity freeze.
Many banks, mortgage lenders, real estate investment trusts (REITs), and hedge funds suffered significant losses. Northern Rock, one of the oldest banks in UK, endured severe run on the money, and is currently under temporary ownership of the UK government. Bear Stearns, the prestigious US investment bank whose stocks traded at over $150 at the beginning of 2007, stunned the Street by succumbing to a fire-sale price of $2 per share. Fitch estimates that total subprime-related losses will reach a massive $400b. As of May 15, 2008, financial institutions had recognized over $280b of such losses.
It is without doubt that the Wall Street technology sector, which includes quantitative structuring & modeling, risk management, analytical software and hardware, quantitative trading, credit rating etc., played a significant role in the current subprime crisis. Wall Street firms engineered complex and poorly understood financial products that nurtured extraordinary leverages. Credit agencies failed to adopt adequate analysis platforms for these securities and consequently jeopardized the accuracies of the ratings they issued. And, financial institutions either lacked the right risk management tools or did not incorporate proper risk management measures into their colossal portfolios.
Driven by the subprime crisis, firms are beginning to re-evaluate their risk strategies, trading strategies, financial products, and information technologies in search for enhancing the returns on financial assets and protecting their balance sheets against today’s volatile, fast-moving financial market. For example, risk management has quickly emerged as the newest “low latency” financial application on Wall Street. Innovative technologies and quantitative modeling are investigated to manage ever-sophisticated risk management requirements. The rapidly changing mix of market structure, financial services & management, quantitative modeling, and information technology is fueling a new era of creativeness and innovation. In this workshop, we will gather experts in Wall Street technology to discuss the risks and opportunities looking forward, to explore strategic technologies and solutions for better decision making, and to stimulate ideas of reducing risks and grasping opportunities.
Ren-Raw Chen, Fordham University
Kunshan Huang, HSBC
Lurng-Kuo Liu, IBM T. J. Watson Research Center
Wen-Ching Wang, Talisker Capital Management