EDHEC

Barry Schachter

Yaacov Kopeliovich

A Journal of Derivatives article entitled, 'Robust Risk Estimation and Hedging: A Reverse Stress Testing Approach' by Barry Schachter, Research Associate at EDHEC-Risk Institute and Senior Advisor at RiXtrema, Inc. and Yaacov Kopeliovich, also Research Associate at EDHEC-Risk Institute and Senior Advisor at RiXtrema, Inc., together with co-authors Arcady Novosyolov and Daniel Satchkov, have been named the winners of the 2015 Peter L. Bernstein Award honouring extraordinary and compelling research for 'Best Paper in an Institutional Investor Journal' among eleven journals in the past twelve months.

The paper, published in the Summer 2015 issue of the Journal of Derivatives, investigates a recent innovation in risk management. The stress test has become an increasingly important risk assessment and management tool. But while it is easy to imagine a stress scenario and to estimate its impact on the firm’s financial condition, it is not so obvious how to select the most meaningful scenarios in the first place, either to get reasonable coverage of the space of stressful possibilities or even to focus on those that are most probable. In this article, the authors approach the problem from the reverse direction. They begin with a specified level of loss and pick the most likely scenario that generates that loss. They then use principal components to construct a set of alternative scenarios that produce the same level of loss but in (maximally) different ways. This provides much greater insight into which sources of risk are the most important and the most stable across scenarios.

Barry Schachter is Senior Advisor at RiXtrema, Inc. Dr. Schachter has spent his career leading risk groups at hedge funds, most recently as a CRO at Woodbine Capital Advisors. Prior to Woodbine, Dr. Schachter has led risk management teams at Moore Capital, Balyasny Asset Management, SAC Capital and Caxton Associates. He was responsible for corporate market risk measurement at Chase Manhattan Bank from 1997 to 2000. From 1990 to 1994, he worked on derivatives regulation at the U.S. Commodity Futures Trading Commission, and during part of that time was the Acting Director of Research. He taught at Simon Fraser University, Tulane University, the University of Utah, Rutgers University and the University of Pennsylvania. Dr. Schachter received his M.A. and Ph.D. from Cornell University, and BS from Bentley University. Barry currently serves on the Editorial Board of the Journal of Derivatives and maintains one of the longest running risk websites at Gloria-Mundi.com. He is a Fellow of the Program in Mathematics in Finance at NYU’s Courant Institute and a Research Associate at EDHEC-Risk Institute.

Dr. Kopeliovich has spent his career in the investment management industry with extensive experience in understanding the tail risks inherent in complex multi-asset portfolios. Yaacov has held positions at Bank of America analyzing complex asset backed securities and was most recently employed at MEAG New York Corporation as a Senior Quantitative Analyst in the fixed income and structured products areas. After serving two years as a director of research in Rixtrema Corporation Dr. Kopeliovich moved to academia after accepting an offer from University of Connecticut for an assistant professor in residence position in the finance department. Dr. Kopeliovich received his Masters in Financial Engineering from the Haas School of Business at the University of California, Berkley, his B.S., M.S. and PhD. in Mathematics from Hebrew University, Jerusalem, Israel and his ph.d, in finance from EDHEC School of Business in Nice in 2014.