Analyst discusses pending financial revolution at CTC event

Financial analyst Roberto G. Mendoza predicted an impending revolution in the fields of corporate and government finance when he spoke at the Cornell Theory Center's CTC-Manhattan offices April 26.

As the scientific rigor from academia that has transformed the capital markets over the past 30 years begins to be adopted in the corporate setting, Mendoza said, "The ability to use options pricing to enable corporations to quantify their investments can revolutionize the ways that CEOs look at their businesses."

Mendoza is co-chief executive of Hancock, Mendoza, Dachille & Merton, Ltd. and former vice chairman of J.P. Morgan and Co. He presented the keynote address to attendees of the CTC's 12th annual Derivatives Securities Conference.

Mendoza was outlining his view of the relationship between "research and the real world" by identifying two immediate frontiers facing academic researchers: the challenge of incorporating human factors into their equations and the critical need to reach out across the knowledge gap that exists between academics and practitioners.

CTC-Manhattan Director Thomas F. Coleman noted: "Options-pricing mathematics has developed into a wonderfully deep and practical subfield in applied mathematics with great benefit to the current efficient operation of the capital markets. Now Roberto Mendoza is suggesting that the time has come to focus this disciplined mode of thinking onto the fields of corporate and government finance. I fully subscribe to this view."

Mendoza pointed out that he does not feel that the niche of the financial intermediary is lost, but rather that the "intermediary of the future" will bring both intellectual and financial capital to its new role of transmitting innovation across the knowledge gap.

The conference was organized by Joseph A. Cherian, Bank of America Capital Management; Coleman; CTC and CTC-Manhattan; Robert A. Jarrow, professor of investment management at Cornell's Johnson Graduate School of Management; and Stuart Turnbull, Lehman Brothers Inc. It was hosted by the Johnson School, CTC-Manhattan and the International Association of Financial Engineers.