Research

Industry Projects | Student Summer Projects | Academic Papers

Industry Projects

Danielle Goldfarb and Andreas Park, Will Libra Succeed? Results of a Global Randomized Survey Experiment

Executive Summary: Facebook’s cryptocurrency project Libra -- and the associated impacts on banks, central banks, the global payments and trading system, and others -- hinges on the widespread and global adoption of the digital currency, especially amongst young people in emerging markets.

To assess the likelihood of Libra adoption, we deploy a survey of 5000+ respondents in the U.S., India, and Nigeria, asking whether respondents are prepared to use money that has been issued by a technology company, and whether, if they own a business, they are willing to accept such money.

Consilium Crypto

Development of reference rates fro crypto assets

RIWI

Financial related microsurveys

Student Summer Projects

Summer 2018

Industry Sponsors: TD Bank, Bluepier, Cogniframe, Karen, Transunion, Overbond, and Vexo.

Accepted Student Profiles: 3 Rotman Commerce, 5 Rotman MBA, 4 BSc. (Computer science, Math, Financial Economics), 1 MSc. (Computer science), 14 M Eng.

Other Facts: Projects engaged 12 faculty mentors, 7 from Rotman and 5 from engineering. Students working with TD were employed by TD. Students working with the other companies (startups) were employed by Rotman and paid through the FinHub budget.

Academic Papers

Darcy Drury and Fatima Saya, A Call to Arms for PayTech

Abstract: A Call to Arms for PayTech: The Future of Payment in Canada
The following is based upon three pillars. First, it incorporates themes and insights from a two-hour
roundtable discussion held at the Rotman School of Management on February 22nd, 2019 composed of
leading investors, businesses, regulators, and academics. Chatham House rules were in effect. Second,
several interviews were undertaken to further develop these themes and insights. Third, additional research
was undertaken to complement the contents herein.

Andreas Park and Katya Malinova, Market Design with Blockchain Technology

Abstract: A Call to Arms for PayTech: The Future of Payment in Canada
The following is based upon three pillars. First, it incorporates themes and insights from a two-hour
roundtable discussion held at the Rotman School of Management on February 22nd, 2019 composed of
leading investors, businesses, regulators, and academics. Chatham House rules were in effect. Second,
several interviews were undertaken to further develop these themes and insights. Third, additional research
was undertaken to complement the contents herein.

Andreas Park and Katya Malinova, Tokenomics: When Tokens Beat Equity (Paper, Medium Article, Lecture)

Abstract: In an initial coin offering, investors fund a venture in exchange for tokens that grant rights to future economic output. To many financial industry insiders, tokens have no intrinsic merit and exist only as a way to evade regulations. We demonstrate that generic revenue-based token contracts are indeed economically inferior to equity and lead to over- or under-production. However, an optimally designed token contract, which is a combination of an output presale and an incremental revenue sharing agreement, yields the same payoffs as equity. Moreover, with entrepreneurial moral hazard, tokens can finance a strictly larger set of ventures than equity.

Pat Akey, Vincent Gregoire, and Charles Martineau, Retail Insider Trading and Market Price Efficiency: Evidence from Hacked Earnings News

Abstract: From 2010--2015, a group of convicted traders accessed earnings information hours before their public release by hacking several major newswire services. We use their "insider" trading as a natural experiment to investigate how efficiently markets incorporate private information in prices. 15% of a firm’s earnings surprise was incorporated into its stock price prior to its public release when the hackers had access to non-public information. Volume and spread-based measures of informed trading detect this activity, but order flow-based measures do not. We find evidence that uninformed, professional traders traded in the same direction, amplifying the impact of informed trading.

Jay Cao, Jacky Chen, and John Hull, A Neural Network Approach to Understanding Implied Volatility Movements

Abstract: We employ neural networks to understand volatility surface movements. We first use daily data on options on the S&P 500 index to derive a relationship between the expected change in implied volatility and three variables: the return on the index, the moneyness of the option, and the remaining life of the option. This model provides an improvement of 10.72% compared with a simpler analytic model. We then enhance the model with an additional feature: the level of the VIX index prior to the return being observed. This produces a further improvement of 62.12% and shows that the expected response of the volatility surface to movements in the index is quite different in high and low volatility environments.