Associate Professor of Finance
Julien Hugonnier is Associate Professor of Finance at the Ecole Polytechnique Fédérale de Lausanne (EPFL) and the head of its Master in Financial Engineering program. He joined SFI in 2006 and has held an SFI Senior Chair since 2012. Prior to joining EPFL, he held positions at Carnegie Mellon University, HEC Montreal, and the University of Lausanne. Prof. Hugonnier is a regular speaker at finance conferences worldwide and serves on the editorial board of various academic journals in the areas of mathematical finance and financial economics.
His main research area is theoretical asset pricing.
In a recent work, Prof. Hugonnier and his co-author seek to determine how liquidity and capital requirements affect the liquidity management and insolvency risk of banks. Their contribution to the existing literature is to develop a dynamic model that accounts for multiple aspects of a bank’s decisions, such as the choice of liquid asset holding, equity share, payout policy, and default. They use this model to determine the optimal response of banks to the imposition of liquidity and capital requirements, and to determine the effect of such requirements on insolvency risk. Their model shows that liquidity requirements lead to lower bank losses in default at the cost of an increased likelihood of default. Combining liquidity requirements with leverage requirements reduces both the likelihood of default and the magnitude of bank losses in default. This means that in order to control both aspects of a bank’s insolvency risk one should consider regulations that combine liquidity and capital requirements as proposed in the Basel III accords.