Haas School Team Wins Lehman Brothers Financial Engineering Case Competition
April 11, 2005
An extremely strong Haas School of Business team of one MBA and four MFE students won the 8th Annual Graduate Business School Financial Engineering Competition held at Lehman Brothers in New York on Friday, April 8, 2005, defeating teams from five of the nation’s other top MBA programs: Wharton, Chicago, Columbia, MIT, and Carnegie Mellon. Team members were Luca Barone (MFE05), Alex Bauer (MBA05), Jaime Lee (MFE05), Yadong Li (MFE05), and Steve Liang (MFE05). Professors Richard Stanton and Nancy Wallace were the team’s Haas faculty supervisors.
The competition is sponsored by Appaloosa Management Partners, L.P. and Lehman Brothers, and is organized by Carnegie Mellon University and Lehman Brothers Fixed Income Research. This is the third win for Haas out of the seven competitions we have participated in, and it is the second win in just the last three years – last year, while we finished second overall, the judges from Lehman again voted the Haas team number one.
The competition is a case competition involving applications of sophisticated financial engineering techniques to solve risk management problems for a hypothetical client and devise appropriate hedging strategies for a hypothetical employer who is an investment bank. The case this year involved credit derivative products that were securitized by Home Equity Loans and exposed investors to potentially significant levels of residential real estate risk. The solution to the case involved pricing the expected risk exposure and then re-engineering the bond structure to maximize the investment bank’s bond sales, mitigate as much as possible of the client’s exposure to unwanted real estate risk, and design a hedging strategy for the investment bank to manage risk exposure to retained bonds.
The Berkeley team was the only team to successfully solve all three problems and won the competition by a unanimous vote of the Judges. Judging is based on the technical merit of the solution, the professionalism of the presentation, and the responsiveness of team members to the Judges’ questions and comments.
