News

Pete Kyle Joins Smith School

One of the foremost financial theorists in the world, Albert “Pete” Kyle, will join the Smith School as the Charles E. Smith Chair in Finance in July 2006. He is best known for creating the “Kyle Model,” which provides a foundation for the modern theory of market microstructure, a subfield of finance dealing with the process of price formation in financial markets.

“Our ability to attract a scholar of Pete’s stature says a great deal about the high quality of the Smith School and its finance department,” said Howard Frank, dean of the Robert H. Smith School of Business. “He has had an extraordinary career and impact on both the canon of finance research and on a generation of emerging scholars.”

Beyond his seminal contributions to the theory of information and financial markets, Kyle’s research has had a pervasive impact in areas such as asset pricing, investments, corporate finance, and financial institutions. Kyle’s impact has also been extended beyond the stock market, and is reflected in markets for derivatives, bonds, and global trading mechanisms, with policy implications for exchange design and market regulation.

Kyle joins the Smith School after serving as professor of finance at the Fuqua School of Business at Duke University. He received his PhD in economics from the University of Chicago in 1981. He also held appointments at Princeton University and the University of California at Berkeley, where he was tenured.

Smith Professor Receives Humboldt Award

Dilip Madan, PhD ’72 (Economics), PhD ’75 (Mathematics), professor of finance at the Smith School, has been chosen to receive a 2006 Alexander von Humboldt Research Award in mathematics. The award recognizes Madan’s body of research in the field of mathematical finance.

The trading of derivative securities in financial markets has exploded in the last 30 years, and these securities are hard to value accurately. Since the Black-Scholes model was developed in the early 1970s, literally hundreds of variations of derivatives valuation models have been developed to value an ever-expanding set of derivatives. However, few have had as significant an impact on practice as Madan’s Variance-Gamma (VG) model (developed with Eugene Seneta of the University of Sydney). Their model uses a more accurate methodology in accounting for the way underlying asset prices move through time. It is one of three pricing models used by Bloomberg (along with the Black-Scholes model and the Stochastic Volatility model developed by Smith Professor Steve Heston.)

Beyond the VG model, Madan has been incredibly prolific, publishing scores of papers. He was drawn to finance because the problems presented by that field are mathematically interesting. “They come to me with real issues which are mathematical problems and I try to help in solving them,” says Madan. His research focuses on improving the quality of pricing models, enhancing the performance of investment strategies, and advancing the understanding and operation of efficient risk allocation in modern economies.

Madan was nominated for the award by Ernst Eberlein, a Professor at the University of Freiburg, Germany. Madan plans to collaborate on research with Eberlein, traveling to Germany for several month-long trips over the course of the next several years. He will receive the Humboldt Award in Berlin, Germany, this July, where he will also attend a reception given by the President of the Federal Republic of Germany.

Madan is a professor of finance in the Smith School. He is managing editor of Mathematical Finance and associate editor for both theJournal of Credit Risk and Quantitative Finance.

Smith Research On SSRN

Many working papers and abstracts produced by Smith School faculty and graduate students may now be accessed at Social Science Research Network (SSRN.) SSRN is composed of a number of specialized research networks in each of the social sciences which reaches over 35,000 academics in more than 70 countries. Each of SSRN's networks encourages the early distribution of research results by reviewing and publishing submitted abstracts and by soliciting abstracts of top quality research papers around the world. The Networks encourage readers to communicate directly with other subscribers concerning their own and other's research.

To learn more, visit http://www.ssrn.com/link/Robert-H-Smith-Business.html.