Webinar and interview question database: Department of Finance Insurance and Real Estate

Important reminder for Finance majors from my colleague and department chair, Dr. Underwood:

Just a quick reminder that we will have another webinar this Friday 10/23 at 1:30.  Jesus Rios (BBA 2010) will be our guest.  He started his career with the BVA Group and is now the Director of Finance for Blackline Midstream.  You can register for the Zoom webinar at this link:

https://baylor.zoom.us/webinar/register/WN__JM9MrGSRYWqtjKIfbnzzw

Also, please consider contributing your experiences to a new database we are starting.  We hope to create and maintain a database of questions asked by interviewers (both for internships and full-time positions.)  For more information, please visit this page and follow the link to the survey.  There will be a module on the Canvas home page for our Department where we will provide updates to the database periodically.

Have a great week!

On solving Problem #2 in Problem Set #6

Throughout this problem, there is adverse selection, but it turns out that MostStates’ entry in part C (into the market previously monopolized by Gecko in parts A-B) mitigates adverse selection somewhat, while also expanding risk management opportunities, particularly for the low and medium risk types. Solving this problem requires figuring out who purchases which policies and calculating the expected profit (or loss) per policyholder type in each of parts A, B, C, D, and E of this problem. Once you perform these calculations, then the average profit (or loss) per policy is simply the average loss per policy, based on which driver types purchase each policy.

Moral Hazard Class Problem

I plan to devote part of tomorrow’s class meeting for Finance 4335 to solving the “Moral Hazard Class Problem” linked below.

In a nutshell, this problem looks carefully at how to go about designing a so-called “incentive compatible contract” between a corporate owner (the principal) and manager (the agent). The trick involves making sure that both the principal and the agent have “skin in the game”; here, this pertains to offering the corporate manager an incentive compensation scheme involving a cut in salary that is supplemented by a bonus if certain profit targets are met.

See y’all tomorrow!

Moral Hazard Class Problem.pdf

To Serve the Public, Seek Profits

Former hedge fund manager Andy Kessler provides a compelling application of Milton Friedman’s thesis (that the social responsibility of business is to seek profits) by comparing and contrasting so-called “stakeholder capitalism” with “shareholder capitalism” in today’s Wall Street Journal. Students who plan to take advantage of this Wednesday’s (extra credit) UT-Austin panel discussion should also consider reading Kessler’s WSJ op-ed alongside Friedman’s famous essay in preparation for the panel discussion.
wsj.com
“Producers capture only 4% of the value they create, and all of society enjoys the rest.”