“Students have a lot of misconceptions about finance”

Julien Hugonnier completed an internship on a trading floor as part of his PhD, but his interest in this well-paid student job didn’t last long. “It was too repetitive,” he says. “In any case, I always knew I’d never work at a bank or financial institution.” Today, he’s a full professor of finance at EPFL, where he was named best teacher in the finance section for 2023.

Hugonnier joined EPFL as an associate professor in 2009, after teaching at the University of Lausanne from 2004 to 2009 and HEC Montréal from 2002 to 2004. Before that, he obtained a PhD in Finance from Université Paris 1 and worked as a postdoc at Carnegie Mellon University in Pittsburgh.

A dual French and Swiss citizen, Hugonnier feels perfectly at home at EPFL. Also because, as someone who’s gifted in mathematics, teaching at a university where “students are willing to tackle complicated subjects – and even like it!” suits him to a tee. “Much of modern-day finance is based on quantitative methods, especially when it comes to derivatives,” says Hugonnier. “That means today’s graduates must be perfectly comfortable with mathematical equations.”

Finance is everywhere

“I had no problem integrating into EPFL,” he says. “The students here already have good math skills, so I have the impression that I can cut right to the chase.” And cutting to the chase is a hallmark of Hugonnier’s teaching style. “When I was a student, I liked it when my professors covered only a few topics in class but dug deep into each one. So now, that’s what I do when I teach. I think that’ll be more useful to students later on, when they start doing their own research. Having a solid foundation is the key to success.” By the same token, Hugonnier has banned laymen’s terms from his vocabulary. He believes such an approach has no place in an engineering school. “But that doesn’t mean I’m a crochety old professor – I’ve even been known to even crack a joke!” he says.

Bathed in finance as a boy – “my grandfather was a securities trader and my father was an economics professor” – today Hugonnier is surprised that many students who walk into his classroom still don’t have a good grasp of what finance is, even at that point in their lives. “Here I’m talking about Bachelor’s students, who tend to have a lot of misconceptions about finance.” That gives rise to animated classroom discussions – “and I love it!” he says. However, it also means he has the tricky task of explaining to students that “finance is everywhere and you can’t simply treat it as a stand-alone topic.”

A different perspective

Hugonnier, who specializes in asset pricing and general equilibrium, has been teaching for over 20 years, starting with a job he took as a lecturer during his first year as a PhD student. “I really enjoy the different perspective you get when you have to teach something,” he says. “And this new perspective feeds into my research.” Another benefit he finds is that “when you’re a professor, you’re constantly looking for ways to improve. You always have a nagging doubt when you give a lecture, which pushes you to stay on top of the subject matter.” Last but not least, “my students are my interface with industry,” since those in his Master’s class in financial engineering are required to complete an in-company internship.

For the past few months, Hugonnier has been devoting much of his time outside the classroom to another teaching-related endeavor. He wrote a textbook with Pierre-Oliver Weill from UCLA and Benjamin Lester from the Philadelphia Federal Reserve on over-the-counter (OTC) markets, or markets where transactions are negotiated directly between investors rather than on a centralized exchange. “OTC markets are one of my main research areas,” says Hugonnier. “I like that in these transactions, it’s very clear how prices are set.”

OTC markets aren’t new, but “they’ve changed considerably over the past 20 years,” he says. “They were initially used in the job market, but were then adopted as a way to structure the trade of financial assets outside a standard securities exchange.” The book, intended for PhD students, is called The Economics of Over-the-Counter Markets and is designed to serve as a “compilation and summary of research in this area.” It’s scheduled to be published this fall by Princeton University Press.