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Posted 5.14.07

Weatherheadlines recently sat down with Peter Ritchken, Kenneth Walter Haber Professor of Finance, chair of the banking and finance department, and professor of operations, to learn about his path into the finance profession, the new MS in Finance program, his research, and his artistic talents.

Q: From where do you originally hail? From which school(s) was your degree awarded?
I grew up in Zimbabwe and I lived in the capital, Harare, until I was 18. I then went to Cape Town, in South Africa where I earned degrees in mathematics and statistics. I actually came to Cleveland to get my Ph.D. in operations research, which I earned in 1982. What brought me here was the desire to work with specific faculty in the area of non linear optimization. Case had a huge reputation in that area, and indeed the department was the first of its kind to offer a Ph.D. program. I was offered a job as an assistant professor in that department, and, since I enjoyed the faculty, and had several projects under way, I accepted the position.

In 1989, I decided that I may want to move into finance. Most of my interests at that time were in the area of mathematical and computational finance and I thought I would benefit by visiting a finance department and soaking up all aspects of finance. I spent one year at the University of Southern California, in its finance group, and thoroughly enjoyed the experience. I came back to Case, and joined the finance department. I have been in that department since 1990, and have retained a secondary appointment in operations.

Q: What classes do you teach?
Over the last few years I have taught classes in risk management for the executive M.B.A.s, and I have taught classes in option and futures, and fixed income, mortgages, and credit for the M.B.A.s. I also have taught a class in mathematical finance to Ph.D. students.

Let me chat to you about my MBA classes. One cannot understand how firms are using, or should be using, risk management, without an appreciation of the tools and techniques in the field. Therefore in my classes I provide an introduction to the technical side of the field. The basic building blocks of financial engineering begin with call and put options. These products are to finance, what the periodic table is to chemistry. By meshing calls and puts together, the financial engineer can create a financial product that exactly meets specific risk management needs. My introductory class focuses on using derivatives (calls and puts) to change a firm's risk profile with respect to equity, interest rate, foreign exchange, and commodity risks.

Much of the risk management topics that I cover involve fixed income, mortgage markets and the exploding market of credit products including credit default swaps. Once the foundations have been covered, the applications are endless. Indeed, at Weatherhead we offer a unique package of risk management classes.

In addition to teaching risk management classes in the M.B.A. programs, I have also had the privilege to be the primary advisor of about 20 Ph.D.s, most of them from the operations department. Most of these students have been much smarter then I am, and it has been very rewarding to mentor them, to watch them absorb material, and to work with them on a huge array of topics. I have learned so much from them, and I am extremely proud of their accomplishments. The ability to do interdisciplinary work that cuts across both finance and operations has been one of the joys that have kept me at Weatherhead.

Q: I understand you are one of the driving forces behind Weatherhead’s new M.S. in Finance degree. Would you please tell us a bit about the program and its genesis?
We designed a one-year Master of Science in Finance degree focusing on the principles of finance and their applications within the corporation, capital markets, investments and risk management. This program is designed for students who want to acquire analytical tools and methodologies that can immediately be applied in business. Students immerse themselves in an innovative curriculum that is relevant to those working or planning to work in: commercial, retail and investment banking, investment management, brokerage firms, security analysis, hedge funds, capital markets, derivatives, risk management, financial consulting, mergers and acquisitions, private equity, venture capital and corporate restructuring, corporate planning, budgeting, strategic planning and corporate treasury

Our graduates will immediately add value to an organization in their role as financial analysts, investment advisers, risk managers or corporate or investment bankers. See our web site for more information.

Q: In your opinion, how does the MS in Finance most benefit Weatherhead, as well as Cleveland and the surrounding Northeast Ohio region?
When we designed the program, we took it to all the major banks, and industries in Greater Cleveland area. Our final design reflects the information we received from them. We feel that this is a joint venture with our corporate partners. They have specific needs, and our program is designed to meet their needs. Our students and faculty will work with our corporate partners and the corporations will be able to cherry pick the very best and brightest students.

While there are several new M.S. programs in finance, our program is rather unique in that we have corporate partners who will be actively engaged with our students and our faculty. This corporate partnership will allow us to attract the very brightest of students to this region, from all over the United States and indeed, from all over the world. Hopefully, the majority will be picked up by our partners and will stay and sink roots in the Cleveland area, and will help build up our economy.

Q: Would you please provide a brief description of your current research?
My current research interests are in mathematical finance, where I specialize in derivative models, asset pricing, interest rate and credit risk modeling; in financial contracting in supply chains, and quite recently in certain aspects of behavioral finance.

I will describe three projects that I am currently working on:

  • With colleagues at the Federal Reserve Bank, I have developed a four-factor model that characterizes the dynamics of the riskless term structure.
  • I am also working on understanding the time varying nature of credit spreads embedded in corporate bonds. The purpose of this work is to better understand how investors update their assessment of corporate bond prices over time.
  • My most recent project involves looking at what happens to stocks when they enter or exit the S&P 500 index. The behavior of stock prices added or dropped from the S&P 5500 index has been of great interest to financial economists. All existing studies focus on price changes in the underlying stock. We hope to cast light on this issue by investigating what happens to prices of option contracts on the underlying stocks at the announcement and effective dates.

All three studies share a common theme of trying to obtain keen insights about determinants of price formation in capital markets.

Q: What do you like to do in your spare time?
I wish I had spare time! We have two boys who are actively involved in soccer and my wife and I coach. I enjoy golf. There are so many wonderful golf courses in Greater Cleveland area and one goal I have is to play as many of them as possible. My youngest son is addicted to putt-putt and I have become quite competitive with him. We have traveled far and wide in search of the ultimate putt-putt course. I have always enjoyed Jazz. Bill Evans remains my all-time favorite.

Q: What is your favorite travel/holiday destination and why?
I really enjoy traveling. My favorite country to visit is still South Africa; I enjoy being in the bush, hiking; I enjoy beaches and I also enjoy visiting game reserves. I have many relatives there and am always excited to visit with them.

Of course, I also enjoy visiting the major cities of Europe. Put me in an art museum, or in a jazz club, and I am a happy camper.

Q: What is one surprising fact about yourself that you would like to share with the Weatherhead community?
Well, I come from a family of artists. Unfortunately none of the talent rubbed off on me. Yet I really enjoy throwing paint on canvas. Usually large canvases, and usually with expensive oil paints. When I say I have no talent, I am completely sincere, and those folks who have seen my work generally agree with that assessment. The few that passed some positive remarks usually do so with their fingers crossed. Painting for me, is like meditation. I escape to nowhere; I have fun, and I always feel that the next canvas will produce a masterpiece. If you visit the research page of my Web site, you will see a picture of one of my masterpieces!

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