The opportunity for instantaneous communication has been accompanied by changes in investor behavior, Campbell says. Companies like Freddie Mac sell securities globally through the Internet, and this affects investor decisions. The marketplace is a lot more competitive for every company. Technology has also had an impact on the work of the financial engineer. Now it's flooded with low-rated firms.
Investors are concerned about how to hedge default risk in risky debt.
But the opportunities still exist in corporate bonds, i.e., risky debt. Unal and Madan have published two papers in this field, in the Review of Derivatives Research and the Journal of Financial and Quantitative Analysis. Their recent working paper on credit risk is also included in the Wharton Financial Institutions Center's working paper series. Recently they served as panelists on the center's financial engineering roundtable on the quantification and trading of credit risk. Madan also has taught at seminars on credit risk in London and New York.