David K.A. Mordecai, President of Risk Economics®, participated in the International Association of Financial Engineers (IAFE) Liquidity Risk Committee (LRC) Panel Discussion on Financial Innovation, Complexity, Fire Sales and Panics, on December 15, 2010, at Pricewaterhouse Coopers office in New York City. David K.A. Mordecai chaired the panel, and the other two participants were Alp Simsek and Roy Henriksson.
After a brief introduction to the general topic by David KA. Mordecai, Alp Simsek provided an overview of the work between him and his co-author Ricardo Caballero of MIT from two of their joint papers: Fire Sales in a Model of Complexity and Complexity and Financial Panics. He followed with a synopsis describing his own work-in-progress on speculation and new asset innovations.
Roy Henriksson then focused on the policy implications related to the effects of complexity on liquidity and forced asset sales, followed by some further discussion with David KA. Mordecai describing the practical relevance of Alp Simsek’s research for understanding market and instrument complexity within the context of fire sales and financial panics, and also moderated the general Q&A.
The LRC 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.