The Bendheim Center for Finance

Monday, Mar 19, 2012

Interdisciplinary research in finance with an empahsis on quantitative approaches

The 2008 global financial crisis brought attention to the impact of financial and economic policies on the lives of ordinary people. The debate over how best to respond to the crisis illustrated another point: fundamental research on finance is essential for global wellbeing.

The Bendheim Center for Finance is dedicated to fundamental research and education on how financial markets behave and how policies can shape the function of these markets. Established in 1998, the Center supports an interdisciplinary approach to research that relies on quantitative reasoning and exploration of the theoretical underpinnings of market behavior as well as the development of practical applications of policies.

In a 2010 panel discussion on “Bubbles, Behaviors and the Origins of the Crisis,” faculty members José Scheinkman, Ronnie Sircar, Yacine Ait-Sahalia, and Harrison Hong engaged in a lively discussion on the financial crisis and the impact of overconfidence, poor risk management and greed on the industry and the economy as a whole.Some of the research questions being addressed at the Bendheim Center include: What are the essential economic forces that drive market behavior? What are the best policy tools for combating global economic recession and restoring confidence in financial markets? How do innovative financial instruments influence the performance of financial markets? What is the best way to set asset prices and how do these methods affect credit risk and portfolio management? What statistical and modeling methods could be created to provide insights about the behavior of financial markets?                                      

These research areas and many others are being addressed by the over 35 full-time Princeton faculty members affiliated with the Center. Bendheim researchers also have appointments in Princeton departments such as Economics and Operations Research and Financial Engineering (ORFE). A number of visiting faculty members from other educational institutions conduct research at Bendheim each year.

As an interdisciplinary research center, the Bendheim Center forges links between economics and other fields such as mathematics, computer science, engineering, operations research, psychology and public policy.

The Bendheim Center offers three programs aimed at educating the next generation of leaders: a master degree in finance, an undergraduate certificate, and an opportunity to do research as part of a PhD in Economics, ORFE, or the Program in Applied and Computational Mathematics.

  • Master in Finance research projects at the Bendheim Center include topics such as market volatility, risk pricing, monetary policy, the economics of various exchanges, the role of structured products and hedge funds in the financial crisis, central banking and the debt crisis, financial markets of energy and the environment, microfinance, credit ratings and lending.
  • Doctoral and postdoctoral research with a focus in finance covers subjects such as portfolio choice and private equity fund performance, risk in the mortgage markets, contagious bank runs, options markets and asset price fluctuations, and bank deregulation.
  • The undergraduate certificate in finance exposes students to the concepts of asset pricing, portfolio management, banking, corporate finance and governance, and regulation, and gives students the opportunity to work with a finance faculty member on a senior thesis or paper.

The Bendheim Center's Corporate Affiliates Program offers corporate partners the opportunity to interact with faculty and engage students. In addition, the Center facilitates visits from corporate leaders from major financial firms as well as influential individuals from the Federal Reserve and central banks around the world.

The Old Dial Lodge is home to the Bendheim CenterThree Bendheim-affiliated faculty members have received the Nobel Prize in Economic Science since the center was established. These are Christopher Sims (2011), Paul Krugman (2008) and Daniel Kahneman (2002). Many present and former Bendheim economists have served in leadership roles involving federal oversight of the monetary and financial system, including Ben Bernanke, who as chairman of the Department of Economics in 1988 was an integral part of the founding of the Bendheim Center.

“Given ongoing dynamic market conditions, this continues to be one of the most exciting times for research and study of finance,” said Yacine Aït-Sahalia, the director of the Bendheim Center and the Otto A. Hack 1903 Professor of Finance and Economics. “By bringing together outstanding scholars from a wide variety of disciplines in a well-equipped setting that encourages dialogue and interaction, the Bendheim Center for Finance is an ideal environment in which to conduct significant research in finance. It also serves as a major venue where the world’s leading experts in finance from academia, government and the private sector can meet regularly to exchange views and information.”