Professor Andrew W. Lo discusses his proposal to use financial engineering to spread risks among investors and provide financial incentives to develop successful cancer treatments. He explains how the cancer megafund works, and how investors can make good money in finding a cure for cancer.
With rising interest rates hurting bond prices, investors and financial advisers are scrambling for other options to provide stability to their portfolios. Some of them have turned to "alternative" funds, many of which claim to offer bond-like stability without exposure to interest-rate rises. Alternative funds use hedge-fund-like strategies to try to capture returns that aren't tied to broad markets. Some funds use options to limit their market exposure, for example, or place bets that certain stocks will drop in value. Professor Andrew Lo comments on the use of alternative funds.
Andrew W. Lo and his coauthors (Robert C. Merton, Monica Billio, Mila Getmansky, Dale Gray and Loriana Pelizzon) discuss the interconnectedness of global markets and the need for policy integration in a Financial Analysts Journal piece, “On a New Approach for Analyzing and Managing Macrofinancial Risks,” which appears in the March/April 2013 issue. Abby Farson Pratt, assistant editor at CFA Institute, recently talked with Lo about his team’s research as part of a series of FAJ author interviews.