THE ROBERT T. LECLAIR FINANCE DEPARTMENT SEMINAR SERIES

The Robert T. LeClair Finance Department Seminar Series extends the curriculum by inviting leading scholars to speak with VSB students on leading issues within the finance industry. Past topics have included responsible investing and investment decision-making; the costs and benefits of Socially Responsible Investing (SRI) for university endowments; and the pitfalls of central clearing in the derivatives markets. 

SPRING 2025 SEMINAR SERIES

Seminars are held on Fridays at 1:45 p.m. in Bartley 2010.

PRESENTER BIOGRAPHIES

Peter Iliev is a Professor of Finance at the Smeal College of Business, Pennsylvania State University, where he teaches financial management. He received his Ph.D. from Brown University and held an appointment as Financial Economist with the U.S. Securities and Exchange Commission in Washington, DC. His research interests include financial regulation, corporate governance, and corporate finance. 

His research has appeared in the Journal of Finance, the Review of Financial Studies, the Journal of Financial Economics, the Journal of Accounting Research, and Management Science. It has also been covered in the Wall Street Journal, the Washington Post, the Dallas Morning News, Bloomberg, Barron's, the Columbia Law School Blue Sky Blog, and the Harvard Law School Forum on Corporate Governance and Financial Regulation. 

James Vickery is the Senior Economic Advisor and Economist at the Federal Reserve Bank of Philadelphia. He received a Ph.D. in economics from the Massachusetts Institute of Technology and a bachelor’s degree in economics from the University of New South Wales, Australia. James Vickery studies the financial system and how it reallocates risk and capital across different groups in the economy. He is particularly interested in mortgage finance, and his research in this area sheds light on how factors like regulation, securitization, and financial technology affect credit availability and mortgage contract design. He also studies a variety of other topics including microinsurance markets, financial contracting, and bank stress testing.

His work has appeared in leading economics and finance journals such as Review of Financial Studies, Journal of Financial Economics, and Economic Policy Review. 

Underwater: Strategic Trading and Risk Management in Bank Securities Portfolios

Abstract: We use bond-level data to study how US banks manage their securities portfolios, focusing on bank responses to the rapid shift in interest rates in 2022-23 and the role of financial and regulatory frictions in shaping bank behavior. Interest rate risk in bank portfolios increased sharply as rates rose, but with significant cross-bank heterogeneity depending on the ex ante share of bonds with embedded options. Exposed banks did not, however, offset the rise in risk either by selling long-duration bonds or hedging using "qualified" accounting hedges. We identify two frictions that may help account for this inertia. First, we show banks are highly averse to selling underwater bonds at a discount to book value--e.g., banks were 8-9 times more likely to trade bonds with unrealized gains than unrealized losses in 2022-23. This "strategic" trading is more pronounced for banks that do not recognize unrealized losses in regulatory capital and banks with low stock market valuations. Second, frictions in establishing qualified accounting hedges limited hedging activity depending on bond type and accounting classification. Banks did, however, reduce the sensitivity of regulatory capital to interest rates by classifying the riskiest bonds as held-to-maturity.