Professor Charles Sutcliffe

'Professor Charles Sutcliffe

Professor Charles Sutcliffe

  • Professor of Finance

Contact details

Profile & Expertise

Charles Sutcliffe is a professor of finance at the ICMA Centre. Previously he was a professor of finance and accounting at the University of Southampton, and the Northern Society Professor of Accounting and Finance at the University of Newcastle. In 1995-96 and 2003-4 he was a visiting professor at the London School of Economics. He has published in a wide range of refereed journals, and is also the author of nine books. He has acted as a consultant to the Financial Services Authority, the Securities and Investments Board, H.M. Treasury, the Cabinet Office, the Corporation of London, the United Nations, the London Stock Exchange and the London International Financial Futures and Options Exchange.

He has received research grants from the Social Science Research Council, the British Council, the Institute of Chartered Accountants in England and Wales and the Chartered Institute of Management Accountants. He is a member of the editorial boards of the Journal of Futures Markets, the Journal of Business Finance and Accounting, the Journal of Financial Management and Analysis and the European Journal of Finance; and is vice-chairman of the Research Board of the Chartered Institute of Management Accountants. For 2001-2007 he was a director of USS Ltd, which manages a £39 billion pension fund.

Specialisms

  • Stock Index Futures
  • Pension Schemes

Key publications, books, research & papers

Article

Pension scheme redesign and wealth redistribution between the members and sponsor: the USS rule change in October 2011

Platanakis, E. and Sutcliffe, C. (2016) Pension scheme redesign and wealth redistribution between the members and sponsor: the USS rule change in October 2011. Insurance: Mathematics and Economics. ISSN 0167-6687 doi: 10.1016/j.insmatheco.2016.04.001

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The redesign of defined benefit pension schemes usually results in a substantial redistribution of wealth between age cohorts of members, pensioners, and the sponsor. This is the first study to quantify the redistributive effects of a rule change by a real world scheme (the Universities Superannuation Scheme, USS) where the sponsor underwrites the pension promise. In October 2011 USS closed its final salary scheme to new members, opened a career average revalued earnings (CARE) section, and moved to ‘cap and share’ contribution rates. We find that the pre-October 2011 scheme was not viable in the long run, while the post-October 2011 scheme is probably viable in the long run, but faces medium term problems. In October 2011 future members of USS lost 65% of their pension wealth (or roughly £100,000 per head), equivalent to a reduction of roughly 11% in their total compensation, while those aged over 57 years lost almost nothing. The riskiness of the pension wealth of future members increased by a third, while the riskiness of the present value of the sponsor’s future contributions reduced by 10%. Finally, the sponsor’s wealth increased by about £32.5 billion, equivalent to a reduction of 26% in their pension costs.

Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

Asset liability modelling and pension schemes: the application of robust optimization to USS

Platanakis, E. and Sutcliffe, C. (2015) Asset liability modelling and pension schemes: the application of robust optimization to USS. European Journal of Finance. ISSN 1466-4364 doi: 10.1080/1351847X.2015.1071714

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This paper uses a novel numerical optimization technique – robust optimization – that is well suited to solving the asset-liability management (ALM) problem for pension schemes. It requires the estimation of fewer stochastic parameters, reduces estimation risk and adopts a prudent approach to asset allocation. This study is the first to apply it to a real-world pension scheme, and the first ALM model of a pension scheme to maximise the Sharpe ratio. We disaggregate pension liabilities into three components – active members, deferred members and pensioners, and transform the optimal asset allocation into the scheme’s projected contribution rate. The robust optimization model is extended to include liabilities and used to derive optimal investment policies for the Universities Superannuation Scheme (USS), benchmarked against the Sharpe and Tint, Bayes-Stein, and Black-Litterman models as well as the actual USS investment decisions. Over a 144 month out-of-sample period robust optimization is superior to the four benchmarks across 20 performance criteria, and has a remarkably stable asset allocation – essentially fix-mix. These conclusions are supported by six robustness checks.

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Professor Charles Sutcliffe

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Book

Risk and trading on London's Alternative Investment Market: The stock market for smaller and growing companies

Board, J. , Dufour, A. , Hartavi, Y., Sutcliffe, C. and Wells, S. (2015) Risk and trading on London's Alternative Investment Market: The stock market for smaller and growing companies. Palgrave Pivot. Palgrave Macmillan, Basingstoke. ISBN 9781137361295

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Professor John Board

Professor John Board

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Dr Alfonso Dufour

Dr Alfonso Dufour

Director of the PhD Programme, Head of Postgraduate Research Programmes - Henley Business School

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

Trading death: the implications of annuity replication for the annuity puzzle, arbitrage, speculation and portfolios

Sutcliffe, C. (2015) Trading death: the implications of annuity replication for the annuity puzzle, arbitrage, speculation and portfolios. International Review of Financial Analysis, 38. pp. 163-174. ISSN 1057-5219 doi: 10.1016/j.irfa.2014.10.010

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Annuities are perceived as being illiquid financial instruments, and this has limited their attractiveness to consumers and their inclusion in financial models. However, short positions in annuities can be replicated using life insurance and debt, permitting long positions in annuities to be offset, or short annuity positions to be created. The implications of this result for the annuity puzzle, arbitrage between the annuity and life insurance markets, and speculation on expected longevity are investigated. It is argued that annuity replication could help reduce the annuity puzzle, improve the price efficiency of annuity markets and promote the inclusion of annuities in household portfolios.

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Professor Charles Sutcliffe

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Article

Pricing and hedging short sterling options using artificial neural networks

Chen, F. and Sutcliffe, C. (2012) Pricing and hedging short sterling options using artificial neural networks. Intelligent Systems in Accounting, Finance and Management, 19 (2). pp. 128-149. ISSN 1099-1174 doi: 10.1002/isaf.336

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This paper compares the performance of artificial neural networks (ANNs) with that of the modified Black model in both pricing and hedging Short Sterling options. Using high frequency data, standard and hybrid ANNs are trained to generate option prices. The hybrid ANN is significantly superior to both the modified Black model and the standard ANN in pricing call and put options. Hedge ratios for hedging Short Sterling options positions using Short Sterling futures are produced using the standard and hybrid ANN pricing models, the modified Black model, and also standard and hybrid ANNs trained directly on the hedge ratios. The performance of hedge ratios from ANNs directly trained on actual hedge ratios is significantly superior to those based on a pricing model, and to the modified Black model.

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Professor Charles Sutcliffe

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Article

Challenges in identifying factors which determine the placement of children in care? An international review

Bhatti-Sinclair, K. and Sutcliffe, C. (2013) Challenges in identifying factors which determine the placement of children in care? An international review. Child and Adolescent Social Work Journal, 30 (4). pp. 345-363. ISSN 1573-2797 doi: 10.1007/s10560-012-0293-x

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Placing a child in out-of-home care is one of the most important decisions made by professionals in the child care system, with substantial social, psychological, educational, medical and economic consequences. This paper considers the challenges and difficulties of building statistical models of this decision by reviewing the available international evidence. Despite the large number of empirical investigations over a 50 year period, a consensus on the variables associated with this decision is hard to identify. In addition, the individual models have low explanatory and predictive power and should not be relied on to make placement decisions. A number of reasons for this poor performance are offered, and some ways forwards suggested. This paper also aims to facilitate the emergence of a coherent and integrated international literature from the disconnected and fragmented empirical studies. Rather than one placement problem, there are many slightly different problems, and therefore it is expected that a number of related sub-literatures will emerge, each concentrating on a particular definition of the placement problem.

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Professor Charles Sutcliffe

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Article

What determines the out-of-home placement of children in the USA?

Bhatti-Sinclair, K. and Sutcliffe, C. (2012) What determines the out-of-home placement of children in the USA? Children and Youth Services Review, 34 (9). pp. 1749-1755. ISSN 0190-7409 doi: 10.1016/j.childyouth.2012.05.004

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Using NCANDS data of US child maltreatment reports for 2009, logistic regression, probit analysis, discriminant analysis and an artificial neural network are used to determine the factors which explain the decision to place a child in out-of-home care. As well as developing a new model for 2009, a previous study using 2005 data is replicated. While there are many small differences, the four estimation techniques give broadly the same results, demonstrating the robustness of the results. Similarly, apart from age and sexual abuse, the 2005 and 2009 results are roughly similar. For 2009, child characteristics (particularly child emotional problems) are more important than the nature of the abuse and the situation of the household; while caregiver characteristics are the least important. All these models have low explanatory power.

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Professor Charles Sutcliffe

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Article

Better cross hedges with composite hedging? Hedging equity portfolios using financial and commodity futures

Chen, F. and Sutcliffe, C. (2012) Better cross hedges with composite hedging? Hedging equity portfolios using financial and commodity futures. European Journal of Finance, 18 (6). pp. 575-595. ISSN 1466-4364 doi: 10.1080/1351847X.2011.620253

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Unless a direct hedge is available, cross hedging must be used. In such circumstances portfolio theory implies that a composite hedge (the use of two or more hedging instruments to hedge a single spot position) will be beneficial. The study and use of composite hedging has been neglected; possibly because it requires the estimation of two or more hedge ratios. This paper demonstrates a statistically significant increase in out-of-sample effectiveness from the composite hedging of the Amex Oil Index using S&P500 and New York Mercantile Exchange crude oil futures. This conclusion is robust to the technique used to estimate the hedge ratios, and to allowance for transactions costs, dividends and the maturity of the futures contracts.

Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Report

A false perception? The relative riskiness of AIM and listed stocks

Board, J. , Dufour, A. , Sutcliffe, C. and Wells, S., (2006) A false perception? The relative riskiness of AIM and listed stocks. Discussion Papers. 2006-0. Discussion Paper. University of Reading, Reading. pp40.

Professor John Board

Professor John Board

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Dr Alfonso Dufour

Dr Alfonso Dufour

Director of the PhD Programme, Head of Postgraduate Research Programmes - Henley Business School

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Report

The LSE’s AIM market: effect on returns and trading of Canadian stocks

Board, J. , Wells, S., Dufour, A. and Sutcliffe, C. , (2010) The LSE’s AIM market: effect on returns and trading of Canadian stocks. Report. The Task Force to Modernize Securities Legislation , Canada.

Professor John Board

Professor John Board

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Dr Alfonso Dufour

Dr Alfonso Dufour

Director of the PhD Programme, Head of Postgraduate Research Programmes - Henley Business School

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Book or Report Section

Futures and forwards

Board, J. and Sutcliffe, C. (2006) Futures and forwards. In: Garrett, I. (ed.) Finance. The Blackwell Encyclopedia of Management (4). Wiley. ISBN 9781405118262

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Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Book or Report Section

Program trading

Board, J. and Sutcliffe, C. (2006) Program trading. In: Garrett, I. (ed.) Finance. The Blackwell Encyclopedia of Management (4). Wiley, pp. 159-160. ISBN 9781405118262

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Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Book or Report Section

Operations research and finance markets

Board, J. L. G. , Sutcliffe, C. M. S. and Ziemba, W. T. (2009) Operations research and finance markets. In: Floudas, C. A. and Pardalos, P. M. (eds.) Encyclopedia of Optimization. Springer-Verlag, pp. 2696-2704. ISBN 9780387747583 doi: 10.1007/978-0-387-74759-0_466

Professor John Board

Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Book or Report Section

Portfolio theory: mean-variance

Board, J. , Sutcliffe, C. and Ziemba, W. (2013) Portfolio theory: mean-variance. In: Gass, S.I. and Fu, M.C. (eds.) Encyclopedia of Operations Research and Management Science. 3rd edition. Springer, Berlin. ISBN 9781441911377

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Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Book or Report Section

Portfolio selection: Markowitz mean-variance model

Board, J. L. G. , Sutcliffe, C. M. S. and Ziemba, W. T. (2009) Portfolio selection: Markowitz mean-variance model. In: Floudas, C. A. and Pardalos, P. M. (eds.) Encyclopedia of Optimization. Springer-Verlag, pp. 2990-2996. ISBN 9780387747583 doi: 10.1007/978-0-387-74759-0_513

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Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Book or Report Section

Financial markets

Board, J. , Sutcliffe, C. and Ziemba, W. (2013) Financial markets. In: Gass, S. I. and Fu, M.C. (eds.) Encyclopedia of Operations Research and Management Science. 3rd edition. Springer, Berlin. ISBN 9781441911377

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Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Report

Distortion or distraction: US restrictions on EU exchange trading screens

Board, J. , Sutcliffe, C. and Wells, S., (2004) Distortion or distraction: US restrictions on EU exchange trading screens. City Research Series. 3. Report. Corporation of London

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Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Book

Transparency and fragmentation: financial market regulation in a dynamic environment

Board, J. , Sutcliffe, C. and Wells, S. (2002) Transparency and fragmentation: financial market regulation in a dynamic environment. Palgrave, pp320. ISBN 9780333986349

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Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

Scheduled announcements and volatility patterns: the effects of monetary policy committee announcements on LIBOR and short sterling futures and options

Sun, P. and Sutcliffe, C. (2003) Scheduled announcements and volatility patterns: the effects of monetary policy committee announcements on LIBOR and short sterling futures and options. The Journal of Futures Markets, 23 (8). pp. 773-797. ISSN 1096-9934 doi: 10.1002/fut.10083

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Professor Charles Sutcliffe

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Article

Applying operations research techniques to financial markets

Board, J. , Sutcliffe, C. and Ziemba, W. T. (2003) Applying operations research techniques to financial markets. Interfaces: An International Journal of the Institute for Operations Research and the Management Sciences, 33 (2). pp. 12-24. ISSN 0092-2102 doi: 10.1287/inte.33.2.12.14465

Professor John Board

Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

Is the forward rate for the Greek drachma unbiased? A VECM analysis with both overlapping and non-overlapping data

Zacharatos, N. and Sutcliffe, C. (2002) Is the forward rate for the Greek drachma unbiased? A VECM analysis with both overlapping and non-overlapping data. Journal of Financial Management and Analysis, 15 (1). pp. 27-37. ISSN 0970-4205

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Professor Charles Sutcliffe

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Article

Over the moon or sick as a parrot? The effects of football results on a club's share price

Bell, A. R. , Brooks, C. , Matthews, D. and Sutcliffe, C. (2011) Over the moon or sick as a parrot? The effects of football results on a club's share price. Applied Economics, 44 (26). pp. 3435-3452. ISSN 1466-4283 doi: 10.1080/00036846.2011.577017

Professor Adrian Bell

Professor Adrian Bell

Head of ICMA Centre Chair in the History of Finance , Programme Director: MSc International Securities Investment and Banking

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Professor Chris Brooks

Professor Chris Brooks

Deputy Head of School

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

Pension scheme asset allocation with taxation arbitrage, risk sharing and default insurance

Sutcliffe, C. (2004) Pension scheme asset allocation with taxation arbitrage, risk sharing and default insurance. British Actuarial Journal, 10 (5). pp. 1111-1131. ISSN 1357-3217

Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

Black-Scholes versus artificial neural networks in pricing FTSE 100 options

Bennell, J. and Sutcliffe, C. (2004) Black-Scholes versus artificial neural networks in pricing FTSE 100 options. International Journal of Finance & Economics, 12 (4). pp. 243-260. ISSN 1099-1158 doi: 10.1002/isaf.254

Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

The cult of the equity for pension funds: should it get the boot?

Sutcliffe, C. (2005) The cult of the equity for pension funds: should it get the boot? Journal of Pension Economics and Finance, 4 (1). pp. 57-85. ISSN 1475-3022 doi: 10.1017/S1474747204001726

Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Book

Stock index futures. 3rd edition

Sutcliffe, C. M. S. (2006) Stock index futures. 3rd edition. Innovative Finance Textbooks. Ashgate, pp532. ISBN 9780754641926

Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

Merging schemes: an economic analysis of defined benefit pension scheme merger criteria

Sutcliffe, C. (2006) Merging schemes: an economic analysis of defined benefit pension scheme merger criteria. Annals of Actuarial Science, 1 (02). pp. 203-220. ISSN 1748-5002 doi: 10.1017/S1748499500000130

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Professor Charles Sutcliffe

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Joined-up pensions policy in the UK: an asset-liability model for simultaneously determining the asset allocation and contribution rate

Board, J. and Sutcliffe, C. (2007) Joined-up pensions policy in the UK: an asset-liability model for simultaneously determining the asset allocation and contribution rate. In: Zenios, S. A. and Ziemba, W. (eds.) Handbook of asset and liability management: applications and case studies. Handbooks in Finance (2). Elsevier , pp. 1029-1067. ISBN 9780444528025

Professor John Board

Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Report

The impact of the Credit Crunch on the Sterling Corporate Bond market

Board, J. , Sutcliffe, C. and Wells, S., (2009) The impact of the Credit Crunch on the Sterling Corporate Bond market. Technical Report. Investment Management Association pp69.

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Professor John Board

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

Back to the future: a long term solution to the occupational pensions crisis

Sutcliffe, C. (2010) Back to the future: a long term solution to the occupational pensions crisis. Insurance Markets and Companies: Analyses and Actuarial Computations, 1 (2). pp. 11-29. ISSN 2078-2462

Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Book or Report Section

Should defined benefit pension schemes be career average or final salary?

Sutcliffe, C. (2010) Should defined benefit pension schemes be career average or final salary? In: Bertocchi, M., Schwartz, S. L. and Ziemba, W. (eds.) Optimizing the ageing, retirement and pensions dilemma. Wiley, Hoboken, New Jersey, pp. 227-258. ISBN 9780470377345

Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Article

Valuing medieval annuities: were corrodies underpriced?

Bell, A. and Sutcliffe, C. (2010) Valuing medieval annuities: were corrodies underpriced? Explorations in Economic History, 47 (2). pp. 142-157. ISSN 0014-4983 doi: 10.1016/j.eeh.2009.07.002

Professor Adrian Bell

Professor Adrian Bell

Head of ICMA Centre Chair in the History of Finance , Programme Director: MSc International Securities Investment and Banking

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Professor Charles Sutcliffe

Professor Charles Sutcliffe

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Taught modules

Research Project

The aim of the research project is to allow students to define and execute a piece of research in finance on a topic of their choice, with direction from an academic supervisor and with assistance from a doctoral student support supervisor.

The aim of the research project is to allow students to define and execute a piece of research in finance on a topic of their choice, with direction from an academic supervisor and with assistance from a doctoral student support supervisor.

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Stock Index Futures

The module is less quantitative option open to all MSc students that builds on the coverage of futures contracts from term 1. By the end of the module it is expected that students will be aware of the different ways of constructing stock market indices and the implications of these differences, how…

The module is less quantitative option open to all MSc students that builds on the coverage of futures contracts from term 1. By the end of the module it is expected that students will be aware of the different ways of constructing stock market indices and the implications of these differences, how…

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Occupational Pensions

This is an applied course with little quantitative content. It deals with one of the most important groups of institutional investors - pension schemes, focussing on occupational pension schemes. Pensions are in a state of crisis and change, and have become the subject of popular debate and…

This is an applied course with little quantitative content. It deals with one of the most important groups of institutional investors - pension schemes, focussing on occupational pension schemes. Pensions are in a state of crisis and change, and have become the subject of popular debate and…

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Research Project (BSc)

The aim of the research project is to allow students to define and execute a piece of research in finance on a topic of their choice, with direction from an academic supervisor and with assistance from a doctoral student support supervisor.

The aim of the research project is to allow students to define and execute a piece of research in finance on a topic of their choice, with direction from an academic supervisor and with assistance from a doctoral student support supervisor.

READ MORE