Swiss Finance Institute @ EPFL
The Swiss Finance Institute @ EPFL has been created to foster research in finance and to develop a strong offering of programs in finance and financial engineering at the Ecole Polytechnique Fédérale de Lausanne. The focus is on the areas within finance that have a natural interaction with mathematics, statistics, engineering, and science, namely, mathematical finance, financial econometrics, and entrepreneurial finance.
The Swiss Finance Institute @ EPFL participates in two teaching programs, The Master in Financial Engineering at EPFL, which is a highly selective 2-year master program, and The PhD in Finance, which is organized jointly with the Swiss Finance Institute and the Universities of Geneva and Lausanne.
The Swiss Finance Institute @ EPFL benefits from the institutional support of the Swiss Finance Institute, a private foundation created in 2006 by Switzerland’s banking and finance community in cooperation with leading Swiss universities, and from Swissquote, who endowed the Swissquote Chair in Quantitative Finance.
By: Foort Hamelink - Systematic Equities
We develop and test a model in which upfront fees are used to compensate lenders for the penalty-free prepayment option in bank loans. In the model, borrowers learn of their type after investing the loan, causing high-quality borrowers to prepay (or renegotiate). Raising the credit spread does not counteract this ex post erosion of loan-pool quality. We show that an upfront fee can reduce prepayment risk, producing an equilibrium without credit rationing. Moreover, performance-sensitive debt, which adjusts the loan rate ex-post, can play a similar role. For a sample of 3,800 loans, we find that upfront fees increase with prepayment risk and are lower for performance-sensitive loans, consistent with the model predictions.
By: Karin THOBURN, Norwegian School of Economics - NHH
By: Will GORNALL, The University of British Columbia