Alumni Newsletter September 2014


Faculty Profile: Lars Stentoft

Professor Lars Stentoft joined Western Economics on January 1, 2014 as a Tier II Canada Research Chair in Financial Econometrics. His appointment is joint with the Department of Statistical and Actuarial Sciences. He earned his PhD in Economics in 2004 from the University of Aarhus in Denmark and came to Western from the Department of Finance at HEC Montreal.

Recently Lars answered a series of questions for this faculty profile about his research, teaching and move to Western.

1. What area of financial econometrics do you specialize in?

My work focusses on developing flexible time series models for financial asset returns and on their use for option pricing. For such models to be of use, they should be general enough to accommodate the properties of financial data like stock returns in a realistic manner, and this complicates matters significantly. The benefits are clear though, as such frameworks provide tools that speed financial innovations, improve market liquidity, and allow financial markets to price and bear risk more efficiently.

2. What are the practical implications of your work?

My work has implications on how financial assets and derivatives are valued, how their risks are managed, and how financial policy is created and implemented. It is of particular interest to academics, practitioners in the financial industry, policymakers, and regulators. Essentially, the end goal is an increase in financial stability and a decrease in the likelihood of future market crashes or financial crises.

3. What are your first impressions of Western and London?

Western Economics' ranking as a top economics department in Canada that excels in teaching and research is certainly well-deserved and from my first visit here I have been impressed. Since my family and I moved here, we have gotten to know amazingly friendly colleagues and an incredibly professional staff that has made the transition completely effortless. In terms of coming to London from Montreal, it is quite a change of scenery – a testament to the great diversity of Canada, but people are very nice and friendly and everything works very efficiently so we are settling in fast.

4. What about your research and teaching makes a joint appointment with the Department of Statistical and Actuarial Sciences a good fit for you?

A joint appointment makes perfect sense for me since financial econometrics, in part because of the availability of data, heavily utilizes state of the art statistical methods for estimation, testing, and forecasting. Moreover, since most of the applications I work with require solid knowledge of financial modelling, a cross appointment with Stats and Act Sci is a perfect fit.

5. What innovations would you like to bring about at Western as part of your CRC?

My hope is that I can help build an active group of researchers working in the interesting and rapidly developing area that is financial econometrics. In particular, I will try to exploit to the fullest the benefits that my joint appointment gives in terms of interdisciplinary cooperation.

6. When you are not working, what do you do?

My wife would probably say that I work all the time, but in my spare time I like to travel, go skiing and get in shape to run another marathon before too long. Also, we recently had a son and I look forward to spending time with him.

7. What's the best piece of advice you have ever received?

My father always said to bring more than your (fair) share to any type of relationship. That is, don’t think everything can be split 50/50 and be prepared to contribute 60% or more. I believe this holds in any type of relationship, personal as well as professional. Somehow 50/50 does not add to 100!

8. Who had the greatest influence on your career path?

My PhD advisor from Aarhus, Bent Jesper Christensen, is probably the one to blame for my interest in financial econometrics and option pricing. Early on in my career, he provided the guidance needed to focus on an interesting topic, to explore it in detail, and to ask and answer relevant and important questions. In my work with young and upcoming researchers I try to be as good a mentor to them as he was to me. On the other hand, without the support of my parents, both of whom were school teachers and who insisted on the importance of a good education, I would probably never have gotten this far.

Lars Stentoft
Canada Research Chair in Financial Econometrics

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