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Friday, 19th April 2024
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A Day in the Centre for Financial Markets Back  
John Cotter, director of the Centre for Financial Markets at UCD, spends his day collaborating with students, academics and industry professionals, with the aim of developing business education and research in Ireland. He is currently working on a study looking at the attempts to solve the crises in UK defined benefit pensions schemes. The findings suggest that the Pension Protection Fund (PPF) introduced by UK government following the Pensions Act 2004 will exacerbate the crises rather than reduce it.
6.30am Alarm goes. Too early! I returned very late from a joint ECB and FED conference in Frankfurt on the management of trading exchanges. Very tired!
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John Cotter

8.30am Get to the office at Smurfit. I tend to mix my time between the office at Smurfit for teaching and administration, my office at home for research and, increasingly, someone else’s office for meetings. I walk in through this beautiful old convent and go to my ‘cell’.
Check my email. As usual lots of junk, but a few interesting updates on briefings that will take place later in the day. One is on a research project I am doing with a collaborator, Jon Danielsson at the London School of Economics, on pension risk. Pension management is the fastest growing area of debate that I have come across and it is very exiting to be involved. Another mail relates to the signing off a project for AIB, BOI and NIB on currency risk and its impact on exporters. This work has been completed with another member of the Centre for Financial Markets, Don Bredin, and was initiated by the Irish Exporters Association and the Irish Bankers Federation.

9.00am Head into a meeting of the joint committee for research & doctoral studies. The landscape has really started to change in Ireland and especially UCD for financial research and research training. Government support via their ‘4th level’ initiative has provided some badly needed funds to support graduate education. The two main areas of discussion are the funding of successful PhD applicants and finalising core research agendas for the School of Business. On the former we have been able to allocate a number of PhD scholarships with government funding and the main discussion is about building a similar framework with industry support. We also discuss the finalisation of core research areas for the school going forward, and it is clear that the future is promising for the finance group with strong support for ‘financial markets and institutions’ as one of only three themes.

11.00am Do some teaching to our masters class on derivatives. This is the most interesting course that I teach and links in strongly with my research and consultancy projects. The students are a bright bunch and are certainly focused on where they are going. One of the major changes I have witnessed in the last few years is the jobs that these graduates are now getting. Gone is the day of compulsory relocation to London or New York, now quality positions are coming on stream in the IFSC more and more and augur well for the future of the finance industry here. The theme of the class is the use of derivatives in arbitrage, hedging and speculation.

1.00pm Quick lunch and head into another meeting. This time it is the Centre for Financial Markets where we are trying to finalise our annual report and discuss growth initiatives with other research and industry bodies. We are also preparing for an external review and discuss logistics of same. On any given day I spend time on the activities of the Centre and it can be very consuming. However, I see running the Centre as a long term project that is really worthwhile and will have benefits for UCD and the wider community. In the Centre we are involved in a range of activities to develop the research ethos in finance including providing support for publishing in academic journals, and providing propriety analysis on financial markets and their institutions.

2.00pm Meet PhD students and discuss progress of their work. One of the students, Jim Hanly, is doing a study on hedging risk using futures contracts. He is doing really well and has picked a very topical subject area. We have written a paper on energy hedging which has attracted quite a bit of attention, especially in the US. We found that one of the hedging strategies that we examined reduced the risk associated with recent oil price movements by almost 60 per cent. Our discussions centre on further work on energy hedging and some projects that we are completing for industry.

3.00pm Check my email. An updated version of a study that I am completing with David Blake (City University) and Kevin Dowd (Nottingham University) on UK pensions is there for my perusal. This study is looking at the attempts to solve the crises in UK defined benefit pensions schemes. Our findings suggest that the Pension Protection Fund (PPF) introduced by UK government following the Pensions Act 2004 will exacerbate the crises rather than reduce it.
Also there is a submission to the European Journal of Finance (which I am associate editor) that I have to deal with.
I sign off on the currency risk management report and get it sent for printing, and then ring Jon Danielsson, and he updates me on his discussions with pension consultants, Watson Wyatt. He imparts very good news -they have been very positively disposed towards our project,and we have been able to get almost unlimited access to their top investment consultants. Their advice will give our paper much impetus going forward.

4.30pm I have a meeting with Anthony Walsh of the Institute of Bankers at the CitiGroup building. The main issue on the agenda is a new masters programme in finance aimed at industry executives. The strategic alliance between UCD and the Institute culminating in the recent launch of the School of Professional Finance, offers many exiting possibilities for developing business education and research in banking and finance in Ireland. Discussions on the new degree are very promising with a lot of interest coming from industry.

5.30pm Back teaching. Fortunately there is no need to leave the CitiGroup building as the course that I am giving is to the UCD’s IFSC EMBA and is situated here. Whatever tiredness that I should have is always wiped away by our MBAs. Their enthuasism washes over you and they make sure they challenge you to the limit, leaving for the most productive of classes. It is an investment management course where I get the class to manage a simulated investment fund. One of the funds has made some poor decisions and is currently down 20 per cent from their goal of beating the market. Fortunately it is only a simulated return.

8.00pm Get home. Spend quality time with Noelle and kids.

11.00pm Check the markets. I m particularity interested in oil prices and trading in spot and futures markets, as I have just started a new project on oil price risk and its implications. I forecasted the breakthrough of the $70 dollar mark but did not expect the price to continue the upward spiral that it has, and I am particularly interested in the relationship between the spot and futures prices at intraday intervals and these have shown an increasing close set of patterns. This improves the hedging model that we are developing and allows for more attractive hedging performing strategies.

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