David K.A. Mordecai, President of Risk Economics, served as moderator for the International Association of Financial Engineers (IAFE) Liquidity Risk Committee panel discussion on Liquidity Risk and the State of the Market: A Discussion of the Role of Market Externalities, Path-Dependence, and State-Dependence on Asset and Funding Liquidity.
The other panelists were the following:
- Sanford Grossman, Chairman, Quantitative Financial Strategies, Inc.
- Steve Ross, Franco Modigliani Professor of Finance and Economics, MIT and Senior Fellow, IAFE
- Myron Scholes, Chairman, Oak Hill Platinum Partners and Senior Fellow, IAFE
The event was co-sponsored by Bloomberg, the International Securities Exchange and Pacific Alternative Asset Management Company. It took place on February 23, 2006 at Bloomberg headquarters in New York City.
Liquidity risk has become recognized to be among the most complex and pernicious risks facing financial markets and institutions in terms of their function and stability. Liquidity risk is now being studied by academics, practitioners and policymakers as the primary cause of anecdotal phenomenon deemed asset bubbles, financial contagion and market crashes. Furthermore, liquidity risk also undermines price efficiency, and influences complex market behaviors such as strategic and predatory trading. This inaugural forum of leading minds within financial economics discussed the fundamental questions and issues underlying liquidity risk.
The Liquidity Risk Committee (LRC) of the International Association of Financial Engineers attempts to bridge the gap between different concepts of liquidity by organizing and sponsoring forums for discourse among academics, practitioners, and policy makers, and to promote the cultivation and dissemination of applied research relating to all aspects of liquidity risk that affect the stability and function of financial markets and institutions. The LRC is comprised of academics, practitioners, and policymakers involved in researching liquidity risk and its effects on market stability within the context of diverse institutional and industry settings, and in relationship to public policy.
David Mordecai is President and Co-Founder of Risk Economics, a New York City based advisory firm. Risk Economics specializes in the application of computational economics to the proprietary development and scalable implementation of robust modeling and data analytic frameworks for valuation, strategic and systemic risk analysis, and dynamic asset-liability management.