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Academic Research - November 09, 2012

EDHEC-PRINCETON Institutional Money Management Conference 2013

Partnership between Princeton University and EDHEC-Risk Institute - an interview with Lionel Martellini

The EDHEC-Princeton Institutional Money Management Conference 2013 will be held at the Princeton Club of New York in New York City on April 3, 2013. In this month's interview, Lionel Martellini, Professor of Finance at EDHEC Business School and Scientific Director of EDHEC-Risk Institute, discusses the partnership project between EDHEC-Risk Institute and the Operations Research and Financial Engineering (ORFE) department at Princeton University.

Lionel Martellini

Can you tell us how this partnership project between EDHEC-Risk Institute and the Princeton Operations Research and Financial Engineering (ORFE) department has emerged?

Lionel Martellini: I spent the 2011-2012 academic year in the US, with the objective of assessing how best to foster the development of EDHEC-Risk Institute's influence in North America in the years ahead.

In order to benefit from a productive academic research environment while in the US, I accepted a visiting faculty position at Princeton, in the ORFE department, where I had long been entertaining research discussions with Professor Mulvey, one of the leading experts in stochastic optimisation in asset-liability management.

Frank Fabozzi, who had just been hired as a full professor at EDHEC Business School, and who is located near Princeton where he has long-term ties with the finance faculty, had also taken on a visiting position at Princeton, which has been renewed for the 2012-2013 academic year. From discussions held in Princeton during the year between Professors Jianqing Fan, the chair of the ORFE department at Princeton, and John Mulvey, on the one hand, and Frank Fabozzi and myself on the other hand, it has become increasingly clear that both EDHEC-Risk Institute and Princeton ORFE would benefit from initiating a partnership for the development of joint research activities in the area of risk and investment management.

What are the goals and expected focus of this partnership?

Lionel Martellini: One of the key ambitions of this partnership is to develop innovative academic research in finance that could have a strong influence on the practice of investment management, at a time when the industry is facing a number of key paradigm changes leading to an increased focus on risk management. These developments also question a number of fundamental insights from modern portfolio theory, including for example the risk-return relationship from the cross-sectional and time-series perspectives, and the proposed joint research agenda is expected to address some questions that are not only practically relevant, but also on the forefront of outstanding problems in financial economics.

In the end, the common ambition of EDHEC-Risk Institute and Princeton ORFE is to jointly develop and manage a research programme related to risk and investment management, and more precisely with a focus on improving risk management techniques regarded as the true source of added-value in investment management.

More specifically, the programme will focus on the following two aspects: improved measures and models for risk indicators, and advanced uses of the risk indicators in risk management, portfolio decisions and regulatory guidance. These various research directions will heavily draw on tools borrowed from various academic fields, including in particular financial econometrics, mathematical finance and stochastic optimization.

Princeton ORFE and EDHEC-Risk Institute faculties include some of the leading experts in these fields and their combined expertise is expected to lead to influential developments which would re-enforce the visibility of the two partnering institutions, both in academia and investment practice, around these domains.

We understand that outreach activities will be developed in the context of this partnership. Can you tell us more about this?

Lionel Martellini: The broad ambition of EDHEC-Risk and Princeton ORFE is indeed not only to develop cutting-edge research in financial econometrics and financial mathematics, but also to make sure that the investment industry will benefit from whatever useful academic insights will be generated through these research efforts.

In this context, EDHEC-Risk and Princeton ORFE jointly propose an annual event, the EDHEC-Princeton “Academia Meets Practice” conference. The inaugural conference successfully took place in New York City on April 27th 2012. On that occasion, speakers from EDHEC-Risk Institute, from Princeton ORFE, and also from the Bendheim Center for Finance at Princeton University, provided selected investment professionals with the latest academic insights related to new frontiers in institutional money management. The next edition of the conference will be taking place in New York on April 3, 2013.

The format of the conference is meant to facilitate the exchanges of views between academicians and practitioners; it involves presentations by a member of the faculty of Princeton University from the ORFE department and/or the Bendheim Center for Finance, or EDHEC-Risk Institute, followed by a discussion with the audience.

What do you see as the key success factors for this partnership?

Lionel Martellini: The success of the partnership on the research side relies on the exceptional strength of Princeton ORFE and EDHEC-Risk Institute faculty in the domains of mathematical finance and financial econometrics.

On the outreach side, it heavily relies on the influence of EDHEC-Risk Institute and Princeton ORFE within the investment management community. The coordinators of the research efforts on Princeton ORFE side are Professors Jianqing Fan and John Mulvey. The coordinators of the research efforts on EDHEC-Risk Institute side are Professors René Garcia and myself, as well as Professor Frank Fabozzi who is permanently based in the US. Other faculty members, such as Ronnie Sircar on Princeton ORFE side or Jaksa Cvitanic or Raman Uppal on EDHEC-Risk Institute side, among others, are expected to be involved in the research projects as they develop.

In addition to the members of both faculties, the success of the research programme will also depend upon the involvement of doctoral candidates from Princeton ORFE. Selected candidates chosen to work on the joint research projects will be invited to EDHEC-Risk campuses in Europe (Nice and London) or Asia (Singapore) for short-term or long-term visits dedicated to facilitating the coordination of the joint research efforts.

About Lionel Martellini

Lionel Martellini is a Professor of Finance at EDHEC Business School and the Scientific Director of EDHEC-Risk Institute.

Lionel holds Master’s Degrees in Business Administration, Economics, Statistics and Mathematics, as well as a PhD in Finance from the Haas School of Business, University of California at Berkeley. He is a member of the editorial board of the Journal of Portfolio Management and the Journal of Alternative Investments. He conducts active research in a broad range of topics including long-term asset allocation decisions, equity and fixed-income portfolio construction, risk management and derivatives valuation. His work has been published in leading academic and practitioner journals and has been featured in major European and global dailies such as the Financial Times and the Wall Street Journal. He has co-authored reference textbooks on topics related to Alternative Investment Strategies and Fixed-Income Securities.

Lionel has served as a consultant for various institutional investors, investments banks and asset management firms on a number of questions related to risk and asset allocation decisions, and is a regular speaker in seminars and conferences on these subjects.

Lionel Martellini's CV can be found here.