1 East Jackson Boulevard
Suite 5514
DePaul University
312-362-6039
Email: tjacobs6@depaul.edu
1 East Jackson Boulevard
Suite 5514
DePaul University
312-362-6039
Email: tjacobs6@depaul.edu
University of Illinois at Urbana-Champaign, Ph.D. in Finance, 2010
Doctoral Committee:
Professor
George Pennacchi (Adviser)
Professor
Timothy Johnson
Professor
Charles Kahn
Professor Neil
Pearson
Boston College, M.S. in Finance, 1994
University of Alaska Fairbanks, M.S. in Engineering and Science
Management, 1991
University of Notre Dame, B.S. in Mathematics, 1986
DePaul University Department of Finance, 2010-Present
Risk Management (Fin 362)
Boston College, Lecturer, Carroll Graduate School of Management, 1996
MSF Seminar: Derivatives and Risk Management (MF 860)
Reference:
Professor
Robert Taggart
Economic Capital
Specialist, Federal Reserve Bank of Chicago 2003-2004
Managing Director and Head of Analytics, Bank of America 1999-2001
Director, BankBoston 1994-1999
Senior Systems Analyst, John Hancock Mutual Life Insurance 1990-1993
Electronic
Warfare Officer, United States Air Force, 1986 - 1990
Changing Market Perceptions of Who is 'Too Big To Fail' During the Financial Crisis of 2007-2008
The government support of financial firms through direct assistance and programs to improve market liquidity during the worldwide financial crisis of 2007-2008 is unprecedented since the Great Depression. Whether a given firm is ex-ante 'Too Big To Fail' in the mind of government agents is not the principal issue for moral hazard, however. It is investor perception of 'Too Big To Fail' that drives the economically inefficient reduced funding cost for the firm. This work examines the U.S. government's crisis actions as well as two international bank bailouts in a series of event studies employing both debt and equity returns. Other than in the case of private mortgage insurer, Radian, in response to explicit support of Fannie Mae and Freddie Mac, I conclude that only the largest of the banks and the government sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, already perceived to be recipients of explicit or implicit government guarantees, experienced any 'Too Big To Fail' premiums in their debt securities. There is no evidence that these premiums extended to other large financial firms such as broker dealers, non-mortgage insurers or surety firms, in spite of the bailout of Bear Stearns. There is no evidence that letting Lehman Brothers fail was a surprise to investors. In addition, there is no evidence that AIG's large derivative exposures and their associated losses prior to and during the crisis led investors to infer it would be rescued. Federal Reserve programs to improve liquidity and extend lending to non-banks did not lead to 'Too Big To Fail' premiums for firms.
Arbitrage Failures in the Markets for Debt During the Credit Crisis
The crisis repeatedly displayed extensive spikes in liquidity premiums for a variety of traded assets from corporate debt to government debt. This work seeks to relate the price changes to break downs in existing arbitrage relationships among firms seeking to raise liquidity in times of crisis.
The Risk Structure of Interest Rates Revisited
This work seeks to extend the literature for fitting Merton (1974) style structural models of credit spreads by exploiting jumps in asset value with stationary leverage ratios to overcome existing limitations to fitting credit spread term structures at both very short and long maturity. CDS spread data is employed for both industrial and financial firms.
Looking for the Size Cutoff of 'Too Big To Fail' Banking Institutions
A structural model approach in the spirit of Marcus and Shaked (1984) is used to fit large non-bank financial firm CDS spreads. Then, controlling for levels of deposit insurance, banks are examined along the dimensions of size, off-balance sheet exposure and derivative market concentration to search for 'Too Big To Fail' premiums in large bank senior unsecured CDS spreads.
Dodd-Frank Not Likely to End Bailouts as Promised, July 16, 2012 in Heartlander
Systemic Risk Implications of Dodd-Frank
PRMIA Global Webinar, July 11, 2012
Slides in Printer Friendly Form
Slides in Printer Friendly Notes Form
PRMIA Chicago Seminar, June 1, 2012
Slides in Printer Friendly Form
Slides in Printer Friendly Notes Form
CDO Asset Selection and Structuring: The Issuer Perspective, Mar 15, 2001
Optimal Asset Selection for Securitization Structures, Sep 28, 2000
Credit Exposure Measurement Applied to Reserving and Credit Capital for
Derivative Portfolios, Dec 4, 1998
Credit Derivatives:An Introduction to their Use and Pricing, Oct 21, 1998
Changing Market Perceptions of Who is 'Too Big to Fail' During the Credit
Crisis of 2007-2008, Oct 16, 2009
The Risk Structure of Interest Rates Revisited, Oct
26, 2007
Credit Default Swap Market Perception of the "Too Big To Fail" Phenomenon in
Banking, Apr 20, 2007
Measuring Default Correlation, Oct 11, 2006
Investor Reaction in Option Markets, Apr 5,
2006
What can Garch(1,1) Modeling Tell Us About the Degree of Overreaction in Single
Stock Option Volatility? Dec 7, 2005
Last modified on 7/16/2012, Copyright© 2012 Thomas Jacobs
