GUTMANN CENTER FOR PORTFOLIO MANAGEMENT at the University of Vienna - http//:www.gutmann-center.at invites to the following PUBLIC LECTURE: (Apologies for any cross-listings!): Date: December 19th, 2005 - 4.00 p.m. Location: Bank Gutmann AG, Schwarzenbergplatz 16, 1010 Wien Speaker: Prof. Dr. Darrell DUFFIE, Stanford http://www.stanford.edu/~duffie/ Title: MEASURING AND PRICING CORPORATE DEFAULT RISK: WHERE ARE WE NOW? Abstract: Some of the fog surrounding the measurement and pricing of corporate credit risk seems to be lifting, as the empirical evidence builds. There are nevertheless some important puzzles to be explained, and we remain in severe need of better models, especially for the pricing and risk management of correlated credit risk products (for which the market-standard copula models have significant inadequacies). Investors are compensated for bearing corporate default risk with market premia (credit yield spreads or credit derivative prices) that appear to be large relative to expected losses, and highly variable across time. There is evidence of significant clustering of defaults across corporate issuers, above and beyond that suggested by the correlation of observable risk factors such as equity returns, volatility, leverage, interest rates, and broad macroeconomic business-cycle variables. This is a clue to the surprisingly high prices of tranched credit products that are exposed only to those portfolio default losses that are above extremely high thresholds relative to historical losses. Drawing from a number of new collaborative research projects, this talk will present some recent evidence, suggest some new modelling approaches, and speculate on the underlying economic causes of these puzzles, which may include unobservable common risk factors, sluggish movement of capital across market segments, and agency in the asset management business. About Darrell Duffie: Darrell Duffie is the James I. Miller Professor of Finance at The Graduate School of Business, Stanford University, where he has been a member of the finance faculty since receiving his Ph.D. at Stanford. Duffie, recently a Director of The Board of The American Finance Association, is a Fellow of the Econometric Society, a Research Associate of the National Bureau of Economic Research, a member of Moody's Academic Research Committee, and the 2003 IAFE/Sunguard Financial Engineer of the Year. He is currently on the editorial boards of Econometrica and The Journal of Financial Economics, among other journals. Please REGISTER: Mail: gutmann.bwl(a)univie.ac.at Phone: +43-1-4277-38186 - Fax: +43-1-4277-38074 Contact and further information: Gutmann Center for Portfolio Management University of Vienna - Mag. Dorothea GRIMM Bruenner Str. 72 - 1210 Wien (Austria) phone: +43-1-4277-38186 - fax: +43-1-4277-38074 mail: gutmann.bwl(a)univie.ac.at - web: www.gutmann-center.at