Robert Jarrow, Cornell professor of finance, economics and investment management at the Johnson Graduate School of Management, has been named the IAFE/SunGard Financial Engineer of the Year by the International Association of Financial Engineers (IAFE).
"This award was set up by the financial services industry to pay tribute to those who have made major contributions to financial engineering as both a discipline and a profession," said Jack Marshall, IAFE executive director. In addition to a cash award and a dinner in his honor, Jarrow will deliver the keynote address at the IAFE's fall conference and annual membership meeting to be held in Boston Sept. 22--24 at the Boston Park Plaza Hotel.
Nominations were made by the 1,600 IAFE members worldwide, leaders in the field of money management representing both academics and practitioners. The selection committee included 17 leading academics and practitioners from the United States, Europe and Asia, including Nobel laureates Harry Markowitz, Merton Miller, Franco Modigliani, Paul Samuelson and Bill Sharpe.
"Bob Jarrow quickly emerged as a clear winner," said Mark Rubinstein, professor of finance at the University of California at Berkeley's Hass School of Management and chair of the IAFE selection committee. "His work in the area of interest-rate sensitive derivatives has been pioneering and widely applied in the business world. It complements the quality of his research in general economics. And he is also known for his work as an educator in this field. He never stops trying to encourage people to use relatively difficult approaches, and he has succeeded."
Financial engineering, the application of sophisticated mathematical tools to assess and manage complex financial investment products, has become indispensable to a wide range of business activities, including investment banking, commercial banking, corporate finance, portfolio management, risk management and financial consulting and planning.
The Heath-Jarrow-Morton option pricing model, developed in 1987 with David Heath, professor of operations research in Cornell's College of Engineering, and their former doctoral student, Andrew Morton, now a senior vice president at Lehman Brothers, is considered the most general and widely applicable of the existing analytical models.
Past recipients of the Financial Engineer of the Year award include Robert Merton (Harvard), Fischer Black, Mark Rubinstein (Berkeley) and Stephen Ross (Yale). Several members of that group have been cited by The Wall Street Journal as potential Nobel Prize winners.
"We're very pleased that Bob Jarrow has been recognized so widely for his outstanding work," said Robert Swieringa, dean of Cornell's Johnson Graduate School of Management. "Finance -- and particularly the development of cutting-edge models for managing investments -- is one of the great strengths of the Johnson School, and Bob's presence here is one reason that is so."
Jarrow, the Ronald P. and Susan E. Lynch Professor of Investment Management, is co-director of Cornell's Financial Engineering program. The program was developed jointly in 1995 by the Johnson Graduate School of Management and Cornell's College of Engineering. Graduates are now working at the top financial services firms, including Salomon Brothers, JP Morgan, Merrill Lynch, Morgan Stanley, Chase Securities and Citibank.
He is ranked by his students as one of the Johnson School's best teachers. Shai Novik (M.B.A. '94), now a managing director with Rogers, Casey and Associates, said: "He's so skilled as a researcher, I was impressed to find that he's also one of the best teachers. He takes the most complicated things and explains them in a manner that's easy to understand. Many people try to impress you with just how complex their research is. Professor Jarrow is the opposite. He takes complicated approaches and instills confidence in our ability to use them."
Robert Jarrow has a B.A. in both mathematics and management science from Duke University, an M.B.A. from Dartmouth's Amos Tuck School of Business, and a Ph.D. in Finance and Economics from the Sloan School of Management at the Massachusetts Institute of Technology. He has taught at Cornell's Johnson Graduate School of Management since 1979.
Jarrow consults widely and currently is director of research for Kamakura Corp. He is the author of four books: Option Pricing (1988), Finance Theory (1988), Modelling Fixed-Income Securities and Interest Rate Options (1996) and Derivative Securities (1996), and is an editor, co-editor or advisory editor for seven academic journals.