Spyros Terovitis
Department of Economics
University of Warwick
Coventry, CV4 7AL
United Kingdom
Office: S2.94 (Social Studies Building)
Email: s.terovitis@warwick.ac.uk
Education
2011-present, PhD Candidate in Economics, Department of Economics, University of Warwick, UK.
2010-2011, MSc in Economics and Industrial Organization, Department of Economics,
University of Warwick, UK (distinction)
2009-2010, MPhil in Economics, Department of Economics, University of Athens, Greece (distinction)
2005-2009, BSc in Economics, Department of Economics, University of Athens, Greece (distinction)
Professional Experience
Teaching
Teaching Fellow, University of Warwick, Department of Economics, October 2015–present.
Teaching Assistant, University of Warwick, Department of Economics, October 2012–present.
Modules:
Topics in Economic Theory: Spring 2016 Micro-Economic Analysis: Fall 2015 (graduate module - Evaluation: 4.5/5 )
Topics in Public Economics: Fall 2015 (under-graduate module - Evaluation: 4.4/5) Micro-Economic
Analysis: Fall 2014 (graduate module - Evaluation: 4.4/5 )
Economics of Strategy: Spring 2014 (under-graduate module - Evaluation: N/A)
Micro-Economic Analysis: Fall 2013 (graduate module - Evaluation: 4.7/5 )
EC202 Microeconomics II: Fall 2012, Spring 2013 (under-graduate module - Evaluation: 4.6/5)
Research
Research Assistant of Prof Ilan Kremer, University of Warwick, Department of Economics, July 2013–
present.
Research Assistant, “Center for Research in Economic Theory and its Applications (CRETA)”, University
of Warwick, Department of Economics, January 2016–present.
Fields of Research Interest
Financial Economics, Information Acquisition, Information Intermediation, Contract Theory, Corporate
Finance
Scientific Software
MS Office - Excellent command
Stata - Very good command
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Mathematica - Very good command
LATEX- Excellent command
Conference - Workshops
Presented
Annual Conference of the Midwest Finance Association, March 2016
Annual Conference of the Royal Economic Society, April 2015
European Winter Meeting of the Econometric Society, December 2014
UECE Lisbon Meetings 2014, “Game Theory and Applications”, November 2014
Presented by Co-authors
20th International Conference of the Society of Computational Economics, May 2014
Tinbergen Institute Seminar Series, October 2014
Organized
Royal Economic Society PhD Conference, April 2015
3rd Warwick Economics PhD Conference, February 2015
2nd Warwick Economics PhD Conference, March 2014
Warwick Micro Theory Work in Progress, 2013–present
Summer Schools
The 23rd Jerusalem School in Economic Theory - Intertemporal Public Economics,
Institute for Advance Studies, Hebrew University, June 18-27, 2012
The 24th Jerusalem School in Economic Theory - Decision Theory,
Institute for Advance Studies, Hebrew University, June 10-19, 2013
Honors, Awards, & Fellowships
Junior Fellowship Award, Royal Economic Society, 2014
PhD Scholarship award, ”Warwick Postgraduate Fellow in Economics (WPFE), 2011 - 2014”
PhD Scholarship award, ”State Scholarships Foundation (IKY)”, 2011 - 2014
AFA Travel Grant, “American Finance Association”, 2014
Prize for the ”Best Dissertation”, Department of Economics, University of Warwick, 2012
MSc Scholarship award, ”Alexander S. Onassis Public Benefit Foundation”, 2010
MSc Scholarship award, ”Papadakis Foundation” (not received), 2010
Prize for the ”Best Performance”, The University of Athens Doctoral Program in Economics, 2010
MPhil Scholarship award, The University of Athens Doctoral Program in Economics, 2009
Prize for the ”Best Performance” from the ”State Scholarships Foundation (IKY)”, 2009
Prize for the ”Top Performance” from the ”State Scholarships Foundation (IKY)”, ac. year 2008 - 2009
Prize for the ”Top Performance” from the ”State Scholarships Foundation (IKY)”, ac. year 2007 - 2008
Spyros Terovitis
Reference
Prof M. Perry, perrymotty49@gmail.com
Department of Economics, University of Warwick
Prof I. Kremer, ikremer@huji.ac.il
Department of Economics, University of Warwick
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Working Papers
The Impact of CRA on Capital Markets
In this paper I argue that the reason for potential problems emerging from Credit Rating Agencies
(CRAs) is more pathological than the literature recognizes; even in the absence of conflict of interest
or a other distortions resulting from players’ behavior, the market structure itself can be a source of
inefficiency. I develop a model in which, by assumption, the CRA is capable of perfect monitoring and
reveals its private information truthfully and costlessly. I explore the impact of such a “sincere” CRA
on the interest rate and the probabilities of project financing and default. I find that even under thesenear-utopian-, conditions the introduction of a CRA may not be beneficial. Specifically, a CRA may
lead to under-financing of projects with positive net present value that would otherwise be financed; a
higher expected interest rate; and a higher expected probability of default. These findings arise from the
feedback effect inherent in capital markets, and the asymmetric impact the effect has on firms of different
quality. I argue that restricting CRAs to provide hard evidence with their ratings might have a negative
effect on the probabilities of project financing and default.
Motivating Information Acquisition Under Delegation
This paper explores the case where equity-holders delegate to a fund manager an investment decision
where the return of each strategy depends on the unknown state of the world. We the characterize optimal compensation contract which incentivizes the agent to acquire costly information, and then to take
the “right” decision based on all available information. We find that the optimal compensation contract
promises a positive payment only if the right action is chosen, i.e. when the manager goes long and the
future price increases or when he goes short and the future price decreases. In addition, we show that
under the optimal contract the payment is higher when the manager takes an action which goes against
the publicly available information. We show that the premium for going against the flow leads to a more
contrarian investment decision compared to the first best. Also, we find that both the direction and the
extent of the distortion relates to the market beliefs. Finally, we explore how the informational role of
the investment varies depending on market beliefs.
Security Design with Endogenous Implementation Choice
We study an economy where an entrepreneur with informational advantage over potential investors sells
securities in order to finance an investment project. We characterize the optimal security when the entrepreneur is not committed to implement the project, which consists of three elements: a payment scheme
similar to standard debt if the project is implemented, a fixed payment in case of non-implementation,
and the conditions determining when the entrepreneur implements the project in equilibrium. We show
that relaxing the assumption that the entrepreneur is committed to project’s implementation, and allowing the entrepreneur to choose whether to implement the project prevents market breakdown and it
leads to a more efficient allocation of resources. We argue that some of the key features of the policy
interventions which aim to restore market functioning can be captured by the optimal security.
Heterogeneity and Clustering of Defaults
(with Galanis G., Karlis A., & Turner M.)
This paper provides a theoretical model which highlights the role of heterogeneity of information in the
emergence of temporal aggregation (clustering) of defaults in a leveraged economy. We show that the
degree of heterogeneity plays a critical role in the persistence of the correlation between defaults in time.
Specifically, a high degree of heterogeneity leads to an autocorrelation of the time sequence of defaults
characterised by a hyperbolic decay rate, such that the autocorrelation function is not summable (infinite
memory) and defaults are clustered. Conversely, if the degree of heterogeneity is reduced the autocorrelation function decays exponentially fast, and thus, correlation between defaults is only transient (short
memory). Our model is also able to reproduce stylized facts, such as clustered volatility and non-Normal
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returns. Our findings suggest that future regulations might be directed at improving publicly available
information, reducing the relative heterogeneity.
Hedging against Risk in a Heterogeneous Leveraged Market
(with Galanis G., Karlis A., & Turner M.)
This paper focuses on the use of interest rates as a tool for hedging against the default risk of heterogeneous
hedge funds (HFs) in a leveraged market. We assume that the banks study the HFs survival statistics in
order to compute default risk and hence the correct interest rate. The emergent non-trivial (heavy-tailed)
statistics observed on the aggregate level, prevents the accurate estimation of risk in a leveraged market
with heterogeneous agents. Moreover, we show that heterogeneity leads to the clustering of default events
and constitutes thus a source of systemic risk.
Last updated: March 19, 2016