Mathematical Finance Seminar

The Impact of Disputes on Financial Markets – Two Recent Case Studies

Speaker: Rick Grove and Bob Selvaggio, Rutter Associates

Location: Warren Weaver Hall 1302

Date: Tuesday, November 13, 2018, 5:30 p.m.

Synopsis:

Disputes about financial markets transactions can have implications for risk in the financial markets.  Lack of certainty regarding the enforceability of contracts is a difficult risk for banks, investors and other financial market actors to manage.  Some recent cases highlight these risks.  This presentation will focus on two different examples:  (1) certain recent disputes between Chinese state-owned enterprises and global banks regarding the enforceability of derivatives contracts; and (2) the recent dispute over the “engineered” credit event that led to the triggering of credit default swaps (CDS) on US home builder Hovnanian that gave rise to substantial potential losses for the hedge fund that had written much of the CDS on Hovnanian, and the substantial potential gains for the hedge fund that had bought much of the CDS protection on Hovnanian.

 

Bio: Rick Grove

Rick Grove joined Rutter Associates, a New York-based global financial markets risk management consulting firm, in 2007 as a Partner and Chief Executive Officer.  Mr. Grove has spent over 30 years working in the financial markets, as both an investment banker and a lawyer.  From 1997 to 2001, he was the CEO of the International Swaps and Derivatives Association (ISDA).  Following ISDA and before joining Rutter Associates, Mr. Grove was a Managing Director at Bank of America, co-managing the Global Commodity Derivatives Group.  Prior to joining ISDA, he worked as a marketer in the fixed income and derivatives businesses at Paribas Capital Markets and headed the Financing Desk and the Fixed Income Syndicate Desk in New York.  Mr. Grove originally joined Paribas as General Counsel of Paribas Corporation after practicing corporate law with Cravath, Swaine & Moore in New York and London. Mr. Grove is currently senior advisor to the American Bar Association’s Task Force on Financial Engineering for Economic Development and is a member of the panel of experts of PRIME Finance in The Hague. He has served on the CFTC’s Global Markets Advisory Council and has testified about the derivatives markets before the U.S. Senate and House of Representatives.  Mr. Grove authored “Valuations in the context of derivatives litigation” in the April 2011 issue of the Oxford University Capital Markets Law Journal and has contributed the chapter “Overview of Derivative Financial Products” to a book entitled “International Financial Disputes – Arbitration and Mediation” which was published by Oxford University Press in March 2015. Mr. Grove has lectured on the financial markets at the Bank of England in London, the CFTC in Washington, the FSA in Tokyo, Columbia University, New York University, Princeton University, the Practicing Law Institute in New York, the Bank of China International Institute of Finance in Beijing, the National Bank of Georgia in Tbilisi and the National Bank of Kazakhstan in Almaty.  Under the auspices of PRIME Finance, Mr. Grove has taught classes on derivatives for judges and arbitrators in Australia, Chile, China, Delaware, Hong Kong, Romania, Singapore and Taiwan.  Mr. Grove received his J.D. from Harvard Law School and his A.B. from Princeton University.

Notes:

Bio: Bob Selvaggio

Bob Selvaggio is Co-Owner and Head of Analytics at Rutter Associates, a financial risk management consultancy in midtown Manhattan specializing in credit and market risk, economic capital, securities and derivatives valuation, hedge analysis and model review, investment portfolio optimization and litigation support.   Until April 2010, Dr. Selvaggio was Senior Vice President and Head of Market Risk and Risk Analysis in Fidelity Investment’s Institutional Products Group, overseeing Capital Markets risk, potential counterparty exposure/CVA and risk adjusted performance measurement.  He was previously Managing Director and Head of Capital Planning and Risk Analysis of Ambac Financial Group, Inc., responsible for derivatives book, insurance and investment portfolio credit and market risk analysis, and economic and rating agency capital attribution and allocation, serving as both a member of Ambac's Executive Risk Management Committee and its Senior Credit Committee.  Prior to joining Ambac in May 1998, Dr. Selvaggio served as a financial economist at Thomson McKinnon Securities, and then held a number of positions at The Chase Manhattan Bank including Senior Asset/Liability Analyst, Head of Fixed Income and Mortgage Research, and Managing Director of Treasury Analytics.   For six years Bob was an adjunct associate professor of Economics at Hunter College of the City University of New York, supervising Master’s theses and teaching graduate courses in corporate finance, financial economics, macroeconomics, and microeconomics.   He is currently an instructor of Advanced Financial Risk Management at New York University.  Bob’s most recent publications include “Economic Value of OTC Derivatives used by Non Financial Firms”, A. Blater, C. Cerria, E. Hughson, and R. D. Selvaggio, Journal of Applied Finance – no. 2, 2014 and “Three Lessons of and Since the Financial Crisis”, The Journal of Structured Finance, Summer 2017.  A graduate of the University of Pennsylvania, Bob holds a Ph.D. in Economics from Brown University. He is a member of the American Economic Association and National Association of Business Economists, and is a BAI Certified Risk Professional in Credit and Treasury/ALM.   Bob is also a 5th degree Master and free-fighting instructor of Tae Kwon Do and both a certified rowing coach and competitor.