Professor Merton had a session with the MBA students and debated with top managers on the
latest thinking in the field of finance and its impact on the creation of strategic value.
How do you define yourself?
f I had to do it, I would define myself as a professor at Harvard Business School that put
into practise at Integrated Financial Ltd what I believe in my research: the use of modern
financial technology, financial science, addressed in the areas of strategic corporate finance,
with a very specific focus risk management.
¿Would you say that the financial markets are more risky than some years ago?
The markets are safer than they used to be. Throughout the world we have seen better instruments and
development of financial markets, opening multiple channels for financial investments, not only dependent
on banks. Today, if a problem or crisis happens in one of the channels, work continues, where as in the
past, there was only one option. Structurally, we are in a better shape.
What are the main issues involved in the international markets nowadays?
I think the main one is the worldwide issue associated to retirement and pensions. One really
important area to focus on - that applies here in Europe, in the United States, in Japan and in Latin
America - is what we can do with retirements, pensions and demographics.
How would you explain that in the last three years all businesses
in equity, commodities, financial institutions... have been showing record profits?
The fact is of course one of
the big drivers in commodities that’s been the great expansion
of China. That has stimulated every aspect of commodities. The extraordinary rise in oil
prices hasn’t yet had a great impact in the economic activity.
These days, there is a strong debate in Europe about
the regulation of hedge funds. What’s your position on that?
I think that it is very important when you design regulations that
you understand the functions that are being performed by what is being regulated. Hedge funds have a very
important role in the system as they function intermediating with fragilities, and to do that, you have to
be flexible. It’s very hard to write a regulation, fix it and be able to address beyond predictable
places in which these would rise. I think they should be likely regulated.
Stock options have been
blamed for many scandals in the last years. What do you have to say about that?
I don’t think stock options were responsible for the scandals,
but I believe that they have influenced behaviour.
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