Ana Fostel, a University of Virginia economics professor, will share the eighth biennial Stephen A. Ross Prize in Financial Economics presented by the Foundation for Advancement of Research in Financial Economics. Professor Fostel will share the award with Professor John Geanakoplos of Yale University, a friend and a mentor with whom she worked as a doctoral student.
Named after an economist who taught at Yale and later at MIT, the Ross Prize is presented to recognize and encourage significant contributions to research in financial economics. Fostel and Geanakoplos’s paper – “Leverage Cycles and the Anxious Economy” – and subsequent work have improved understanding of the effect of leverage on asset prices and the dynamics of collateralized borrowing against financial assets.
“We used to look at interest rates to see whether we’re going into a crisis,” Professor Fostel said. “What this theory is telling us is that we should also be looking at collateral requirements, or what we call margin requirements, to know how much you need to hold as collateral to be able to borrow a dollar. Just before a crisis, those margin requirements become super tight. Before every crisis, you can see margins spike, which means that the markets are getting very, very, very, very nervous.”
A native of Uruguay, Dr. Fostel was an associate professor in economics at George Washington University before joining the faculty at the University of Virginia in 2015. She received a bachelor’s degree in economics from Universidad de la Republica in Montevideo, Uruguay, a master’s degree in mathematics from Brazil’s Instituto de Matematica Pura e Aplicada, in Rio de Janeiro, and a doctorate in economics from Yale University.