SPECIAL REPORT OF THE CHINESE FINANCE ASSOCIATION: THE FIFTH ANNUAL CONFERENCE MIT, BOSTON, AUGUST 15-16, 1998
(by Tong Yao) The Chinese Finance Association held its fifth annual meeting at the Sloan School of Management, Massachusetts Institute of Technology, Cambridge, MA, on August 15-16, 1998. About 110 members and guests attended this event. The meeting started with a welcome speech by the President of TCFA, Mr. Guojun Wu of Stanford University and University of Michigan. The morning session of August 15th featured industrial speakers Dr. Kevin Maloney, Managing Director and Head of Fixed Income Research of Putnam Investments, and Dr. Robert R. Reitano, Vice President and Head of Asset/Liability Risk Management of John Hancock Mutual Life Insurance Co., as well as renowned academic speaker, Prof. Robert Jarrow of Cornell University. Mr. Kevin Maloney shared with the audience his perspectives on the extensive application of quantitative analysis in the fixed-income business. Professor Robert Jarrow brought us an up-to-date picture of the modern credit risk theory and credit risk management. Dr. Robert Reitano gave a speech on "Nonparallel Yield Curve Shifts and Stochastic Immunization". During the conference lunch at MIT's faculty dining hall, TCFA was honored to have Prof. Paul Samuelson, Nobel Laureate Department of Economics, MIT as the keynote speaker. Prof. Samuelson's speech was titled "Calibrating Riskiness in Terms of Certainty-Equivalence: An Alternative to the Tyranny of Mean-Variance" and he offered his perspectives on investment performance evaluation, especially assessment criterion based on risk-adjusted/corrected return. He also humorously recalled his own academic life and told some interesting anecdotal stories about his contempary economists such as Milton Friedman. Prompted by the audience, he discussed the current world economy and international stock markets. When asked about the fundamental reasons for Japan's current economic woes, he honestly said he does not how far it can go but suggests that old-fashioned expansionist policy such tax reduction and consumption encouragement are badly needed. The afternoon session on August 15 focused on the ongoing financial crisis around the world. Mr. Charles Clough, chief investment strategist of Merrill Lynch provided an professional analysis on the Asian economies and the way those countries might get out of the current financial situation. Professor Lester Thurow of MIT then commented on the political and economic interaction in the developing economies and provided his insight on the causes and development of the economic and financial crisis in the emerging market. The afternoon session ended with a speech by Professor Andrew Low of Sloan School of Management, MIT. Prof. Lo discussed his recent research interest in the relationship between human being's psychology and the economic/ financial behavior that can not be explained by the classical economic theory. The paper presentation session on the morning of August 16 embodied the rich tradition of TCFA on rigorous academic research. Professor Chongen Bai of Boston College presented his research on the interaction between capital structure and product market strategy. Kai-Ching Lin of Gifford Fong Associates discussed the quantitative issues on derivatives risk management in his presentation of "Value at Risk for Options", which he co-authored with Mr. Gifford Fong. Shijun Liu of UCLA presented a theoretical perspective on accounting for the probability of currency crisis in pricing fixed-income derivatives in his presentation titled "Currency Options and the Term Structure When Interest Rate Differential, Exchange Rate Volatility and Currency Crisis Probability Are Jointly Determined". Chu-Sheng Tai of Ohio State University provided empirical evidence of time-varying risk premium in his paper "Time-Varying Risk Premia in Foreign Exchange Equity Markets: Evidence from Asia-Pacific Countries". The lunch speakers for August 16 were Mr. Shangquan Gao and Mr. David Robinson. Chinese economist Gao Shangquan's talk was entitled "State Enterprise Reform and the Development of Capital Markets in China". He pointed out that state enterprise are generally faced with three challenges: high debt ratios, overstaffing and excessive assumption of social functions for employees such as maintaining and managing kindergardens for their children. However, China has accumulated huge amount of financial assets, especially in terms of residential deposits. This provides great potential for state enterprise reform and capital market development. He stated that the Chinese government will be adamant in carrying out the task of reforming state enterprises and will strengthen the legal enforcement and protection of state assets and guard from property theft and o ther irregularities. Mr. Gao is the Vice-president of China Research Society for Restructuring the Economic Systems and formerly the Vice -minister of the State Commission for Restructuring the Economic System. Mr. David Robinson, Chief of the China Division of the Asia and Pacific Department of IMF, offered his insights about IMF's involvement in China and his personal opinions about the lessons that can be drawn from IMF's policy prescriptions for the Asian financial crisis. The member forum was held after the lunch, during which each TCFA members introduced himself/herself. Members discussed their common interests in finance research and industrial practice, as well as valuable suggestions with regard to the further development of The Chinese Finance Association. The Fifth Annual Conference concluded with the election. The following members will serve as TCFA officers for the 1997-98 term: President: Changneng Xuan, JP Morgan Chairperson of the Board: Yanfang Yan, Putnam Investments President-elect: Chi Su, Boston College Board of Directors: Wei Huang, Fidelity Investments Jian Hu, University of Minnesota Hua Fan, Goldman Saches Lei Feng, Harvard Business School Bin Qi, Banque Paribus Jun Qian, NationsBanc Montgomery Securities Guojun Wu, Stanford University Yanfang Yan, Putnam Investments Tong Yao, Boston College The board of directors appointed Jian Hu as the editor-in-chief of the TCFA UPDATES, our online newsletter. The board also appoints Stephanie Shu as the auditor.