IAFE student competition in evaluating and hedging Greek and California sovereign risk won by UC Berkeley

NYU MFE-Impact of a Monetary Unionon Sovereign Credit Ratings.pdf
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New York, NYFebruary 21st, 2012 --The IAFE's student competition tackled the timely and important topic of sovereign credit risk.  Commenting on the competition subject, IAFE Senior Fellow and Competition Honorary Chair Peter Carr said, "The sovereign credit crisis was chosen as the topic because of its timeliness and the IAFE's mission to help promote practical and timely research."

The student teams were challenged to help improve the analysis and modeling of financial crises and sovereign risk. Issues in the European debt markets and the recent downgrade of US debt raise concerns about the rapidly-growing amount of sovereign credit risk in the global financial system - sovereign credit risk may be more systemic in nature than previously anticipated. Specifically, the case required teams to:

1. Develop a model/algorithm/technique to provide a replicable, internally consistent, sovereign credit rating and a means for predicting changes to that rating.

2. Apply their methodology and detail how they would hedge the credit risk of two different sovereign entities: (a) Greece, and (b) California.

Click here to read the case in full.

The members of the winning team were Don Goonetilleke, Yang Guo, Xin Heng, Michael Pensky, Ji Tan, led by team captain, Charles Gorintin. The team worked under the direction of Executive Director, Linda Kreitzman.

Congratulations again to the UC Berkeley Team!

Information on the 2012 Academic Competition will be released in the Fall.