Newswise — These are heady times for an expert on mortgage- and asset-backed securities to be in New York City, Anne Zissu has discovered. She recently was appointed associate professor and chairperson of New York City College of Technology's (City Tech) Department of Business.
Confident and opinionated, Zissu comments on the government's "bailout" plan for bank failures caused by people defaulting on mortgage loans, including Fannie Mae and Freddie Mac loans initiated in the 1970s to lower mortgage costs (especially for first-time homeowners). "More foreclosures are to come, perhaps 10 million more borrowers, and mortgage-backed securities are going down in value, some to zero," she says. "Maybe going directly to individual mortgagors would be a better bailout plan than going to banks. However, it would be difficult to manage a program for millions of individuals."
To explain her specialty in mortgage- and asset-backed securities, Zissu uses the analogy of Play-Doh. "Money that flows into banks from mortgages is the Play-Doh. You can make Play-Doh into different shapes. The shapes are the securities developed for each type of investor's needs and are sold in capital markets."
Securitization is the act of banks issuing bonds (securities) backed by mortgages or other assets (e.g., student loans or credit card loans) in which other institutions invest. Even a rock star can be an investment: singer David Bowie's royalties were securitized in 1997, and "Bowie Bonds" were issued.
Zissu was one of the first professional experts to explore securitization in Europe. In 1988, when she and her husband Dr. Charles Austin Stone were in France writing a book on the topic, securitization wasn't yet a viable financial tool. Their timing was prescient: soon a number of countries developed regulations to put securitization in place.
Currently, Zissu and Stone, who is an associate professor of finance at Brooklyn College, have their first patent pending, for a method of computing the life extension risks of investing in senior life settlements. A senior life settlement is a contract that transfers a life insurance policy from the insured person over 65 years old (the "settler" ) to a life settlement company (the investor). The settler receives a sum higher than the surrender value of the policy. The settlement company takes over paying the policy premiums, becoming the beneficiary when the settler dies. If the settler lives longer than her/his life expectancy, the settlement company takes on the "life extension risk" (longevity risk).
After the patent is granted, people who invest in mutual funds may find that their fund managers buy senior life settlements. What distinguishes portfolios of these contracts from pools of other financial assets is longevity risk.
Explains Zissu, "We are providing a means for investors in these securities to better evaluate their risks, resulting in higher payments to seniors who become life settlers." In simple terms, they created a metric to evaluate longevity risk.
This model develops a new type of security, the "sure-death" class, to protect investors from high longevity risk. Their innovative approach measures the sensitivity of the securities' value to changes in the number of years a settler lives above his/her life expectancy.
Again ahead of the curve, Zissu and Stone in 2005 co-authored The Securitization Markets Handbook: Structures and Dynamics of Mortgage- and Asset-Backed Securities (Bloomberg Press). They also co-founded the quarterly journals The Financier (http://www.the-financier.com) and The Securitization Conduit (http://www.asset-backed.com). Zissu currently serves as a Research Fellow in the Financial Engineering Program at POLY-NYU.
Born in Paris, brought up in Paris and Italy and the child of Holocaust survivors, Zissu earned her bachelor's degree in Economics and a master's degree in Econometrics at the University of Nanterre in Paris, where she was the Research Assistant to Professor Dominique Strauss Kahn, presently the Managing Director of the IMF in Washington, DC. She speaks four languages -- Romanian, French, Italian, and English -- making her a perfect fit for City Tech's increasingly diverse faculty.
Before joining City Tech, Zissu was a professor of finance at Temple University for 20 years. The course in asset-backed securities that she helped develop is taught at City Tech as well as at business schools in France, England (Reading University), Tufts University and at the Securities and Exchange Commission (SEC) in Washington, DC. Every year, she and Stone teach a seminar on mortgage-backed securities at the University of Paris/Dauphine's graduate program.
"I am eagerly working with my City Tech colleagues to take the College to the next level as a research-oriented institution and am enjoying sharing my new applied research with my students," she says.
No stranger to the City University of New York (CUNY), Zissu earned her PhD from The Graduate Center, where she met her husband. Years of marriage, two young children and their professional collaboration have not extinguished the spark in their relationship. "After 25 years, I am still so much in love with him," she says.
The Graduate Center has played a significant role in her professional development. She first became interested in her specialty when her PhD advisor there, Ronald W. Anderson, now chairperson of the Department of Finance at the London School of Economics and Political Science, began looking into mortgage-backed securities. "It was a growing new area," she says, "and I loved the financial engineering aspect. There are always new types of securities being created." In the current financial crisis, these new securities have come to be part of the daily headlines, giving a new importance to Zissu's groundbreaking research.
New York City College of Technology (City Tech) of The City University of New York is the largest public college of technology in New York State. Located at 300 Jay Street in Downtown Brooklyn, the College enrolls more than 14,000 students in 60 baccalaureate, associate and specialized certificate programs. An additional 15,000 annually enroll in continuing education and workforce development programs.
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