The Great Financial Crisis, the global economy, cyber security and climate change are four of the most pressing international concerns today, according to NYU’s Volatility and Risk Institute. Formerly known just as the Volatility Institute, VRI has expanded its scope along with its name in an effort to research these issues.
VRI’s expansion into investigating broader issues such as cyber, climate and geopolitical risks coincides with their adoption of an interdisciplinary approach to their institute.
“I think it’s really important that Stern itself is taking this initiative to do more broad research,” Stern first-year Christopher Giron said. “It’s very important to take a holistic view of these issues.”
The VRI is co-directed by two Stern professors: Professor of Management Practice Richard Berner and Professor of Management and Financial Service Robert Engle. They hope to provide a global resource through the Institute’s research and The Volatility Laboratory, which predicts and displays the financial volatility — the variation of trading prices over time — of investors and companies, through measurements of stocks and the use of financial models.
“We hope that all of this work will broaden the ability to assess risk and better inform economic decision making,” Berner told WSN. “The VRI will collaborate with students, faculty and practitioners to share this research with business leaders and policymakers.”
For example, the risk of cybersecurity has greatly increased over the last few years, and VRI is currently monitoring the growing threats.
“The risk that critical information may be stolen or corrupted, public and private assets may be compromised or destroyed, and a cyber attack may bring overall loss of confidence in economic and governmental activity are real and prevalent threats,” the VRI website states.
Similarly, the climate section of the institute is focusing on researching how climate change will impact the financial world. It has investigated how discount rates — the amount future lives are valued when assessing the effects of climate change — may change the value of a long-term investment. Additionally, it looked at what strategies will lead to profitable sustainable investing and predicted how sea level rise will affect real estate prices.
Three of the four areas of risk — financial, climate and geopolitical — are coordinated by a Stern faculty member while cyber risk will be coordinated by Law Professor Randy Milch. Each professor will also get feedback from faculty at different schools like the Courant Institute of Mathematical Sciences, Law School, Tandon School of Engineering, Wagner School of Public Policy and Wilf Family Department of Politics in the Faculty of Arts & Science.
They have created a Faculty Advisory Board with 30 professors that span NYU schools, as well as an External Advisory Board consisting of 25-30 individuals from outside of the NYU community with expertise in risk management, law and other topics.
“[Engle] and I also quickly came to recognize that an interdisciplinary approach was needed,” Berner said. “Each of these risks is multidimensional and perspectives from the law, data and computer science, political science and other disciplines would be essential to understand, measure, analyze and mitigate them.”
Email Ronni Husmann at [email protected].
Correction, Oct 31: A previous version of this article incorrectly stated that the areas of risk will be coordinated by four Stern professors when one of them, cyber risk, will be coordinated by a law professor. The article has been updated to reflect this correction and WSN regrets the error.
