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Seminar
Department
of Systems Engineering and Engineering Management
The Chinese
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Title |
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Intermediation and Value
Creation in an Incomplete Market: Implications for Securitization |
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Speaker |
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Prof. Sridhar Seshadri |
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Date |
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April 20th, 2007 (Friday) |
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Time |
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4:30 p.m. - 5:30 p.m. |
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Venue |
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Room 513 |
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William M.W. Mong Engineering Building |
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(Engineering Building Complex Phase 2) |
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CUHK |
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Abstract:
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This paper studies the impact of financial innovations on real investment decisions within the framework of an incomplete market economy comprised of firms, investors, and an intermediary. The firms face unique investment opportunities that can be undertaken at given reservation prices. The cash flows thus generated are not spanned by the securities traded in the financial market, and cannot be valued uniquely. The intermediary purchases claims against these cash flows, pools them together, and sells tranches of primary or secondary securities to the investors. We derive necessary and sufficient conditions under which additional projects are undertaken due to the intermediary’s actions, and firms are amenable to the pool proposed by the intermediary compared to the no-investment option or the option of forming alternative pools. We also determine the structure of the new securities created by the intermediary, and identify how it exploits the arbitrage opportunities available in the market. This structure is a function of the cash flows available, and in turn, determines the size of the asset pool, and thus, value creation due to the additional projects that are financed. Keywords: Incomplete markets, Securitization, Financial
innovation, Arbitrage-free pricing. |
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Biography:
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Sridhar Seshadri is the Toyota Professor of Information,
Operations and Management Science, at the Leonard N. Stern School of
Business, New York University. He received his Bachelor of Technology degree
in 1978 from the Indian Institute of Technology, His primary area of expertise is Stochastic Modeling and Optimization with applications to distribution system, manufacturing system, and telecommunications system design, database design and finance. His current research interests are in the areas of risk management for supply chains and performance measurement, optimization and control of stochastic service systems. He serves as an Associate Editor for Naval Research Logistics and Management Science and as a senior editor for the Production and Operations Management Journal. He is the Area Editor for Inventory, Reliability and Control for Operations Research Letters. He is on the editorial board of the International Journal of Productivity and Quality Management. Web site: http://www.stern.nyu.edu/~sseshadr |
************************* ALL ARE WELCOME ************************
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Host |
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Prof. Sean Zhou |
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Tel |
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(852) 2609-8336 |
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Enquiries |
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Bolin Ding or Jeffrey Xu Yu |
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Department of Systems Engineering and Engineering
Management |
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CUHK |
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Website |
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http://www.se.cuhk.edu.hk/~seg5810 |
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Email |
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seg5810@se.cuhk.edu.hk |
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