A new class of medications was recently approved that cures more than 95 percent of people with Hepatitis C in only six weeks at a cost of about $84,000 per person, and new therapies with price tags that are likely to exceed $1 million per person are now available or coming soon. How can patients possibly afford them?

"It was during the financial crisis that Andrew Lo had his epiphany: The way to save health care from ever-rising costs is by bringing in the banks. Specifically, by packaging drug development costs into securities to be bought and sold by Wall Street—the very, um, mortgage-bundling technique that blew up the economy in 2007. “The reason the financial crisis happened is not because securitization didn’t work. It happened because it worked way too well,” says Lo, a professor of financial engineering at MIT. Securitization injected a huge pool of money into mortgages—what if you could inject that pool of money into a worthwhile cause and, ahem, do it responsibly?

"So Lo, who has seen his mother and several friends die from cancer, wants to use the techniques of Wall Street to fix healthcare. In a new paper in Science Translational Medicine, he and his coauthors propose creating loans for patients whose insurance policies don’t cover ultra-expensive treatments like the cure for hepatitis C—loans that would be financed by bundling them and selling to Wall Street investors..."

"Risikoaversion ist eine der zentralen Annahmen der Wirtschaftswissen
schaften, aber auch eine grundlegen de Eigenschaft menschlichen Verhaltens. Trotz umfangreicher Forschung ist wenig über Nutzenfunktionen oder über die Gründe für unterschiedliche Risikopräferenzen von Individuen oder Gesellschaften bekannt."

[Risk aversion is one of the central assumptions of economics, but also a fundamental property of human behavior. Despite extensive research, little is known about the benefits or features of the reasons for different risk preferences of individuals or companies]

"Indexes are becoming more than just market-cap-weighted portfolios, according to a new report from MIT. With new passive investment products continuing to emerge, Sloan Professor of Finance Andrew Lo proposed broadening the definition of an index to include “dynamic indexes” such as smart beta strategies..."

"The investment industry should be constantly looking at the impact of technology on the status quo. Just because indexes have been defined as cap-weighted portfolios, doesn’t mean that can’t change. In fact, the evolution in portfolio management necessitates a change in thinking with regard to the definition of indexes, in particular so risk management can be decoupled from alpha generation. In a new paper that argues for a new definition of what constitutes an index, Andrew Lo, professor of finance at MIT Sloan School of Management pushes the boundaries by not only suggesting change, but by demonstrating a new functional definition for indexes and the benefits, and pitfalls, of doing so..."

"Economist, finance professor and investment manager Andrew Lo says some of the 'financial weapons of mass destruction' that helped trigger the 2008-'09crisis can be used for good. If deployed in megafunds by teams of savvy money managers and scientists, he believes, the securitization of intellectual property related to biomedical research could yield lucrative returns while also breathing life into what the biotechnology industry calls the valley of death - neglected early-stage, risky drug development projects for the rarest and most intractable diseases. But Lo, who has conducted several simulations that he says show this strategy could work, is just the idea guy..."

Andrew Lo, Professor of Finance at the MIT Sloan School of Management and the director of MIT's Laboratory for Financial Engineering, discusses his recent paper The Gordon Gekko Effect, corporate culture, and why biology is an increasingly relevant framework for understanding the financial markets.

We are making breakthroughs almost weekly in our understanding of cancer and other deadly diseases, both in how to treat and – in some cases – how to cure them. So why is funding for early stage biomedical research and development declining just when we need it most? One answer is that the financial risk of drug development has increased, and investors don’t like risk. What if we could reduce the risk and increase the reward through financial engineering? By applying tools like portfolio theory, securitization, and derivative securities to construct “megafunds” that invest in many biomedical projects, we can tap into the power of global financial markets to raise billions of dollars. If structured properly, investors can earn attractive returns with tolerable levels of risk, and many more patients can get the drugs they desperately need. Finance doesn’t have to be a zero-sum game; we can do well by doing good if we have sufficient scale.

"In collaboration with Prof. Andrew Lo at MIT Sloan School of Management and Laboratory for Financial Engineering, Dr. Yang’s current research focus is developing and implementing novel business and financing models that utilize bond market capital for financing biomedical drug development..." [Original article is in Chinese]

"Right now, the Food and Drug Administration will not approve a drug if there is more than a 2.5 percent chance that it doesn’t work — no matter the disease or how poor the prognosis.

"There is a cold logic to this approach. And in a recently published paper, Massachusetts Institute of Technology finance professor Andrew Lo took the FDA to task for not being more flexible."

"Computer models designed to help investors navigate turbulence are accused of making things worse.

"Cobras are revered in Indian culture, but the British Raj took a dimmer view of the poisonous snake. Officials promised a lucrative reward for every dead serpent — a scheme that, according to economic lore, backfired horribly..."

"Andrew Lo, professor of finance at the MIT Sloan School of business and money manager (AlphaSimplex), believes that Wall Street-style financial engineering can hasten cures for cancer and other diseases while providing healthy returns to investors.

"During an MIT Sloan webcast on Thursday, Lo said that preliminary research conducted by him and his colleagues indicated that a “mega” primary research-focused fund could produce returns to bondholders of 5% to 8%, while equity shareholders could expect returns ranging from 8% to 12%. An investment fund with interests in perhaps hundreds of research projects could also provide investors with returns not correlated to the S&P 500..."

"Forget venture capital firms investing in promising biotech startups. If we really want to cure cancer, we need pension funds and insurers putting billions of dollars into a fund made up of hundreds of research projects, according to an MIT professor.

"Since 2012, Andrew Lo, a finance professor at MIT’s Sloan School of Management, has been proposing that financiers create a $30 billion “megafund” that invests in early-stage cancer research and development..."

"MOST people agree that a combination of the slowdown in Chinese economic growth and the impending rate hike in the US are to blame for the recent market sell-off, but neither adequately explains its ferocity..."

"Andrew Lo has spent a lot of time peering into Wall Street’s various black boxes and "modeling the endogenous risk among hedge fund strategies." The finance professor at Massachusetts Institute of Technology’s Sloan School of Management and chairman of AlphaSimplex Group LLC shared his thoughts on Friday about the recent spate of volatility in the stock market and what role strategies such as risk parity, trend-following commodity trading advisers and volatility targeting may have played..."