Professor and student team up, change discipline
For most students entering graduate school, research is part of the overall learning process.
Courses are completed; a research area is chosen; students work with faculty to examine the various perspectives on a particular issue; and a thesis addressing gaps in the current literature along with a proposal for a new perspective is written.
What is missing in this scenario are the relationships formed during the course of the graduate student experience. In other words, student and faculty dynamics play an integral role in the MSc and PhD programs.
One remarkable successful story at JMSB comes from the Department of Finance, where RBC Professor of Derivatives Stylianos Perrakis and graduate student Michal Czerwonko have been working together for nearly a decade.
Earlier in his academic career, Perrakis conducted research on the value of options and focused on a tangent that differed from the mainstream. He went on to study other areas, leaving the option valuation research undeveloped.
A few years later, George Constantinides, a senior researcher at the University of Chicago and former president of the American Finance Association, independently discovered the same research theme and collaborated with Perrakis to further explore the concept.
Not long after, Perrakis introduced the research area to Michal, then an MSc student, as a potential thesis topic. The latter accepted and successfully completed the program with his thesis “Stochastic Dominance Bounds on Option Prices in the Presence of Transaction Costs: An Empirical Approach”.
In 2003, Michal Czerwonko’s outstanding academic profile earned him the Joe Kelly Graduate Award for the best academic performance in the Masters program at the business school for that year.
Czerwonko credits the collegiate environment at JMSB as one of the sources of his grad student success. He describes the programs as well-designed and student-faculty interactions conducive to dynamic research.
After his Masters’ program, he went on to pursue the PhD, under the supervision of Perrakis again, and extended his previous findings. With much perseverance and hard work, he completed his doctoral studies and presented a dissertation which is the foundation of three scientific articles, one of which was accepted to appear in the Journal of Finance, the highest impact and leading scholarly journal in the discipline of Finance.
Perrakis notes that Michal’s exceptionally strong technical skills are also at the root of their successful collaboration.
The previous versions of the article attracted the attention of several lower impact journals but both student and professor preferred to focus on the overall quality of the work. For this reason, two other researchers were invited to co-author and help expand and fine-tune the article.
The larger collaborative effort paid off and resulted in a stronger article that presents solid empirical findings and new knowledge to better understand the valuation of options and other derivative financial instruments.
More importantly, their work showcases the relevance of groundbreaking research as it puts into question previously proposed models.
The Perrakis-Czerwonko team truly illustrates the intellectual synergy of faculty-student interactions and how new ideas are changing the world.
Read the forthcoming coming article on the Journal of Finance website:
"Are Options on Index Futures Profitable for Risk Averse Investors? Empiral Evidence".