Francis Longstaff

Francis A. Longstaff is the The Allstate Professor of Insurance and Finance at the Anderson School at UCLA and the current Finance Area Chair. He received his Ph.D. in Finance from the Graduate School of Business at the University of Chicago. He is a Certified Public Accountant (CPA) and a Chartered Financial Analyst (CFA). From 1995 to 1998, Professor Longstaff was head of Fixed Income Derivative Research at Salomon Brothers Inc. in New York. Professor Longstaff has also worked in the research department of the Chicago Board of Trade and for Deloitte and Touche as a management consultant.

His current research interests include the following:

Several of his recent term structure papers have focused on the expectations hypothesis. Recent papers in the area of derivatives have focused on the valuation of American options by simulation and on the valuation of interest rate derivatives in string models of the term structure. Other recent papers provide upper bounds on the size of discounts for lack of liquidity that can be sustained in financial markets and also examine the risk/return relationship for hedge funds investing in pure arbitrage opportunities when there are margin constraints. He has published nearly 40 articles in academic and practitioner journals.

Many of his valuation models have been used widely on Wall Street and throughout the global financial markets. He has extensive experience as a consultant for many Wall Street firms, mutual funds, hedge funds, commercial banks and other financial institutions, software developers and risk management firms, as well as in litigation support. He is a frequent speaker at practitioner seminars and conferences.

Working Papers:

"Risk and Return in Fixed Income Arbitrage: Nickels in Front of a Steamroller?" (with Jun Liu)

"Financial Claustrophia: Asset Pricing in Illiquid Markets"

"Two Trees: Asset Price Dynamics Induced by Market Clearing" (with John Cochrane and Pedro Santa-Clara)

"Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit-Default Swap Market?" (with Sanjay Mithal and Eric Neis)

"Optimal Recursive Refinancing and the Valuation of Mortgage-Backed Securities"

"The Market Price of Risk in Interest Rate Swaps: The Roles of Default and Liquidity Risks" (with Jun Liu and Ravit Mandell)

Forthcoming Articles:

"Corporate Earnings and the Equity Premium" (with Monika Piazzesi), forthcoming, Journal of Financial
Economics

"Electricity Foward Prices: A High-Frequency Empirical Analyis" (with Ashley Wang), forthcoming, Journal of Finance

"Losing Money on Arbitrages: Optimal Dynamic Portfolio Choice in Markets with Arbitrage Opportunities" (with Jun Liu), forthcoming, Review of Financial Studies

"The Flight to Liquidity Premium in U.S. Treasury Bond Prices", forthcoming Journal of Business

Paper Millionaires: How Valuable is Stock to a Stockholder Who is Restricted from Selling it?, forthcoming, Journal of Financial Economics

"Dynamic Asset Allocation with Event Risk" (with Jun Liu and Jun Pan), forthcoming Journal of Finance

"Throwing Away a Billion Dollars: The Cost of Suboptimal Exercise Strategies in the Swaptions Market" (with Pedro Santa-Clara & Eduardo S. Schwartz), forthcoming, Journal of Financial Economics

"The Relative Valuation of Caps and Swaptions: Theory and Empirical Evidence" (with Pedro Santa-Clara & Eduardo S. Schwartz), forthcoming, Journal of Finance.

"Valuing American Options By Simulation: A Simple Least-Squares Approach" (with Eduardo S. Schwartz), forthcoming in Review of Financial Studies

"Optimal Portfolio Choice and the Valuation of Illiquid Securities", forthcoming in Review of Financial Studies

"The Term Stucture of Very Short Term Rates: New Evidence for the Expectations Hypothesis", forthcoming, Journal of Financial Economics

Financial Innovation and the Role of Derivative Securities: An Empirical Analysis of the Treasury STRIPS Program (with Mark Grinblatt) Journal of Finance 55, pp. 1415-1436

Arbitrage and the Expectations Hypothesis, The Journal of Finance 55, 989-994, 2000.

Selected Academic Publications

Other Publications

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