International audience seeks OU professor’s take on financial crisis

Professor J. Austin Murphy

As the financial crisis continues to play out in this country, increasing numbers of researchers are turning to a voice from Oakland University’s School of Business Administration for answers.

A paper by OU Finance Professor J. Austin Murphy has been among the top ten downloaded papers on the Social Science Research Network (SSRN). The Internet network serves as an international clearinghouse for social science research.

Murphy’s piece, “An Analysis of the Financial Crisis of 2008: Causes and Solutions,” assigns most of the blame for the country’s financial crisis to the faulty pricing of credit default swaps. He describes credit default swaps as insurance policies for investments in debt. Their mispricing is the result of theoretical modeling based on unrealistic assumptions, he writes. And the widespread, unregulated use of these swaps left the market vulnerable to disaster when the country started seeing unprecedented levels of residential mortgage defaults.

“This is a timely subject for finance, and the press has not been good about picking up the true causes,” says Murphy, who specializes in debt and credit analysis, international investment and portfolio management.

Murphy says he was pleasantly surprised to learn how well his paper has been received on the SSRN site. “That is an indication people are interested in what’s going on.”

A summary of the paper will appear in John Wiley’s book, Lessons from the Financial Crisis: Insights and Analysis from Today’s Leading Minds, to be published in 2010. Murphy’s chapter will be titled “The Making and Ending of the Financial Crisis of 2008-????”

Not only is Murphy providing readers food for thought when it comes to the financial crisis, he is taking steps to equip Michigan’s business community to meet their own economic challenges. This summer Murphy is presenting a six-week certification course in Credit Analysis through OU’s Center for Integrated Business Research and Education (CIBRE). Murphy will be incorporating real-world examples into his instruction and using state-of-the-art software to help participants develop and fine-tune their abilities.

“Oakland is the only educational institution in the country offering this sort of vital training for financial managers and analysts,” Murphy said. 

By Flori Meeks