Mathematical Finance not only has relevance to asset pricing, credit risk, and the term structure of interest rates (for example), but also presents to mathematicians a new way of looking at research in probability, since the types of questions that need to be answered are no longer motivated by physics or subjects such as electrical engineering. Building on the foundation of the First Cornell Seminar in Finance, the Second will again bring together leading researchers from the Northeast and selected points beyond for an exchange of ideas in seminar format. The basic themes will be asset pricing and hedging, viscosity solution based control theory, credit risk, interest rates, and numerical methods and data analysis using modern statistical techniques.
Fundamental research in finance has helped to change the world of commerce during the last 30 years, and has arguably contributed to the explosive growth in wealth. The key idea is the transfer of risk: modern financial tools allow one party to sell an aspect of a risky exposure to another party, and to do so at a fair price. Often a way for the buyer of the risk to hedge against the risk (a hedging strategy) can also be provided in terms of mathematical formulae. A problem is, however, that while the models have led to huge advances, they are still often crude approximations of reality, and also most of the advances have come from the creation of financial derivatives in markets such as the stock market. Of current interest is the development of analogous tools one could use in other markets, such as credit risk. For example, two companies issuing similar bonds may command different prices due to the markets' differing assessments of their risk of not repaying the bonds. How to model this risk mathematically is as yet poorly understood, and the subject of intense research efforts. This conference will bring together leading scholars, young researchers, and advanced graduate students for an intellectual exchange involving both formal presentations of research advances and also private discussions of special research topics. It will be held at Cornell University, one of the nation's leading institutions of higher learning.
