March 29, 2017

Nancy Wallace Named Chair of the Fed’s Model Validation Council

Prof. Nancy Wallace
Prof. Nancy Wallace

Haas Real Estate and Finance Prof. Nancy Wallace was recently named chair of the Federal Reserve Board’s Model Validation Council, a group of five academics that provides independent rigorous assessment of the Fed’s own benchmark stress testing models.  These models are used to determine the effectiveness of the individual banks’ stress test models.

Wallace will chair her first meeting in Washington D.C. in May 2016. Her appointment became effective in October 2015; she has served as a council member for the last two years.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, stress testing has become a cornerstone of the Federal Reserve’s new approach to the regulation and supervision of the largest financial institutions in the United States. The Model Validation Council is focused on developing tractable and stable stress test models to handle massive data sets now available to Federal Reserve economists for the first time.

“Working with the council is a privilege and highly collaborative. The modeling technology that the Fed has developed would not be possible without the extensive data collection that has been required of the largest banks,” says Wallace, the Lisle and Roslyn Payne Chair in Real Estate Capital Markets and co-chair of the Fisher Center for Real Estate and Urban Economics.

Wallace has long taught a data intensive modeling course on mortgage valuation techniques and asset securitization to Haas Master of Financial Engineering (MFE) students.  This course was developed with her long-time colleague, the late Real Estate and Finance Professor Dwight Jaffee. 

Wallace also directs the Real Estate and Financial Markets Laboratory (REFM Lab) within the Fisher Center. She is currently collaborating with Finance Prof. Richard Stanton, the Kingsford Capital Management Chair in Business, and her colleagues in the Real Estate Group to develop new dynamic house price indices for the U.S. designed for applications in mortgage modeling and bank portfolio stress testing. The REFM Lab’s work relies on a 40-terabyte database containing information on mortgages, mortgage bonds, and other forms of consumer credit such as credit cards, student loans, and real estate liens and transaction prices.  

The Model Validation Council also includes Gregory Duffee of Johns Hopkins University, Manju Puri of Duke University, Philip Strahan of Boston College, and M. Suresh Sundaresan of Columbia Business School.

—By Pamela Tom


Topics:    Research News