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Rama Krishna Ramaswamy at DWIH Excellence Tour 2013 Inauguration Program

Biography

Wharton School of Business
Edward Hopkinson, Jr. Professor of Investment Banking

Education

PhD, Stanford University, 1978; MBA, Duke University, 1973; BTech, Indian Institute of Technology, Kharagpur, India, 1971

Recent Consulting

Investment Management, Bankers Trust, International Monetary Fund

Academic Positions Held

Wharton: 1985present (named Edward Hopkinson, Jr. Professor of investment Banking, 1998; Bankers Trust Term Associate Professor of Finance, 198590). Previous appointment: Columbia University. Visiting appointment: University of Chicago

Other Positions

Research Coordinator, Institute for Quantitative Research in Finance, 197989; Technical Staff Member, Economics Department, Bell Telephone Laboratories, 197779

Chua, C.T. Krishna Ramaswamy, Robert A. Stine (2009), Predicting ShortTerm Eurodollar futures , Journal of Fixed Income, 18, 47–61.

Choong Tze Chua, Dean P. Foster, Krishna Ramaswamy, Robert A. Stine (2007), A Dynamic Model for the Forward Curve , Review of Financial Studies, 21, 265310.

Abstract: This article develops and estimates a dynamic arbitragefree model of the current forward curve as the sum of (i) an unconditional component, (ii) a maturityspecific component and (iii) a datespecific component. The model combines features of the Preferred Habitat model, the Expectations Hypothesis (ET) and affine yield curve models; it permits a class of lowparameter, multiple state variable dynamic models for the forward curve. We show how to construct alternative parametric examples of the three components from a sum of exponential functions, verify that the resulting forward curves satisfy the HeathJarrowMorton (HJM) conditions, and derive the riskneutral dynamics for the purpose of pricing interest rate derivatives. We select a model from alternative affine examples that are fitted to the FamaBliss Treasury data over an initial training period and use it to generate outofsample forecasts for forward rates and yields. For forecast horizons of 6 months or longer, the forecasts of this model significantly outperform those from common benchmark models.

Past Courses

FNCE100 CORPORATE FINANCE

This course provides an introduction to the theory, the methods, and the concerns of corporate finance. The concepts developed in FNCE 100 form the foundation for all elective finance courses. The main topics include: 1) the time value of money and capital budgeting techniques; 2) uncertainty and the tradeoff between risk and return; 3) security market efficiency; 4) optimal capital structure, and 5) dividend policy decisions. During the fall semester there are honors sections of FNCE 100 offered. The seats in the honors sections are awarded through an application process. Please go to https://fnce.wharton.upenn.edu/programs/courseapplications/ for additional information.

FNCE206 FINANCIAL DERIVATIVES

This course covers one of the most exciting yet fundamental areas in finance: derivative securities. In the modern financial architecture, financial derivatives can be the most challenging and exotic securities traded by institutional specialists, while at the same time, they can also be the basic securities commonly traded by retail investors such as S&P Index Options, Beyond trading, the basic ideas of financial derivatives serve as building blocks to understand a much broader class of financial problems, such as complex asset portfolos, strategic corporate decisions, and stages in venture capital investing. The golobal derivatives market is one of the most fastgrowing markets, with over $600 trillion notional value in total. It is important as ever to understand both the strategic opportunities offered by these derivative instruments and risks they imply. The main objective of this course is to help students gain the intuition and skills on (1) pricing and hedging of derivative securities, and (2) using them for investment and risk management. In terms of metholologies, we apply the nonarbitrage principle and the law of one price to dynamic models through three different approaches: the binomial tree model, the BlackScholesMerton option pricing model, and the simulationbased risk neutral pricing approach. We discuss a wide range ,of applications, including the use of derivatives in asset management, the valuation of corporate securities such as stocks and corporate bonds with embedded options, interest rate derivatives, credit derivatives, as well as crude oil derivatives. In addition to theoretical disucssions, we also emphasize practical considerations of implementing strategies using derivatives as tools, especially when noarbitrage conditions do not hold.

FNCE399 INDEPENDENT STUDY

Integrates the work of the various courses and familiarizes the student with the tools and techniques of research.

FNCE717 FINANCIAL DERIVATIVES

This course covers one of the most exciting yet fundamental areas in finance: derivative securities. In the modern financial architecture, financial derivatives can be the most challenging and exotic securities traded by institutional specialists, while at the same time, they can also be the basic securities commonly traded by retail investors such as S&P Index Options, Beyond trading, the basic ideas of financial derivatives serve as building blocks to understand a much broader class of financial problems, such as complex asset portfolos, strategic corporate decisions, and stages in venture capital investing. The golobal derivatives market is one of the most fastgrowing markets, with over $600 trillion notional value in total. It is important as ever to understand both the strategic opportunities offered by these derivative instruments and risks they imply. The main objective of this course is to help students gain the intuition and skills on (1) pricing and hedging of derivative securities, and (2) using them for investment and risk management. In terms of metholologies, we apply the nonarbitrage principle and the law of one price to dynamic models through three different approaches: the binomial tree model, the BlackScholesMerton option pricing model, and the simulationbased risk neutral pricing approach. We discuss a wide range ,of applications, including the use of derivatives in asset management, the valuation of corporate securities such as stocks and corporate bonds with embedded options, interest rate derivatives, credit derivatives, as well as crude oil derivatives. In addition to theoretical disucssions, we also emphasize practical considerations of implementing strategies using derivatives as tools, especially when noarbitrage conditions do not hold.

Knowledge @ Wharton

  • Financial Inclusion in India: Moving Beyond Bank Accounts, Knowledge @ Wharton 09/18/2014
  • Everything from Oil to Silver: Are Speculators Causing Too Much Volatility?, Knowledge @ Wharton 05/25/2011
  • Making Management Pay: Reining in Excessive Risk at India’s Banks, Knowledge @ Wharton 07/15/2010
  • The Ballooning Credit Derivatives Market: Easing Risk or Making It Worse?, Knowledge @ Wharton 11/02/2005
  • A Closer Look at Helping Employees Better Manage Investment Risk, Knowledge @ Wharton 05/22/2002
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