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Professor Timothy Falcon Crack

Chaired Professor of Finance
PhD (MIT) MCom BSc (Hons) PGDipCom (Otago) IMC (UKSIP)

Tel 64 3 479 8310
Office CO 3.29
Email tcrack@otago.ac.nz

Short Biography

Prof. Timothy Falcon Crack is a chaired professor of Finance.  He joined the department in 2004.

Dr. Crack did PhD coursework at MIT and Harvard, and graduated with a PhD in Financial Economics from MIT. He holds degrees in Mathematics (with a lot of Statistics), Finance, and Financial Economics. He also holds a diploma in Accounting/Finance. He also holds the Investment Management Certificate from the UK Society of Investment Professionals.

Dr. Crack has worked as an independent consultant to the New York Stock Exchange and to a foreign government body investigating wrong doing in the financial markets. His most recent practitioner job was as the head of quantitative active equity research for the UK and Continental Europe in the London office of what was the world's largest institutional asset manager. He also taught undergraduate, MBA, and PhD courses at Indiana University's Kelley School of Business. He has won six university teaching awards and been nominated for at least five others.

Dr. Crack has published in the top academic journal in Finance (The Journal of Finance), the top practitioner-oriented journals in Finance (The Financial Analysts Journal and The Journal of Futures Markets), and the top pedagogical journal in Finance (The Journal of Financial Education). He has also published in what was the top interdisciplinary Business journal (The Journal of Business). He has also published in Physica A, Accounting and Finance, and a half-dozen other journals. He has written seven sole-authored finance books including Heard on The Street: Quantitative Questions from Wall Street Job Interviews, Basic Black-Scholes: Option Pricing and Trading, Foundations for Scientific Investing, How to Ace Your Business Finance Class, and two Pocket Heard on The Street books (one with quantitative questions from finance job interviews, and one with brain teasers, thinking questions, and non-quantitative questions from finance job interviews).

Dr. Crack has supervised or co-supervised more than a dozen graduate students, including at least a half-dozen PhDs.


Research Interests

Professor Crack’s research interests include empirical capital markets, quantitative active equity trading strategies, derivatives, econometrics, and market microstructure.

Selected Working papers

  • Markowitz portfolio mathematics and economics (three papers with Robin Grieves).
  • Liquidity and Limit Order Markets (with Peter Whigham and Rasika Withanawasam)
  • Multiple-Stage Dividend Discount Models (two papers with Helen Roberts)
  • Real Option Valuation using NPV (with Tom Arnold).
  • Inferring Risk-Averse Probability Distributions From Option Prices using Implied Binomial Trees (with Tom Arnold and Adam Schwartz).

Published Books

Title/Link Cover/Link Description
Heard on The Street 2017 (18th Ed.) hots18 The original book of quantitative finance job interview questions. In its revised 18th edition. With over 50,000 copies in print, this book is relied upon by job candidates and interviewers alike.
Foundations for Scientific Investing 2017 (6th Ed.) ffsi6 A firm foundation for thinking about and conducting investment. The book walks you through basic quant skills first, and then foundations of finance, and then practical applications of theory. There is an accompanying book with 500 test questions and answers. The Web site that accompanies the book has downloadable spreadsheets to demonstrate concepts and for the worked examples. This book can be used at an advanced undergraduate level or a masters level. It can also be used by PhD students without an undergrad or masters in financial economics who need to come up to speed with advanced reviews of literature and theoretical topics.
Foundations for Scientific Investing Q&A Book (3rd Ed.) TIIQ2 This revised third edition of the Q&A book accompanies Foundations for Scientific Investing. It provides 400 multiple-choice, and 125 short-answer questions to accompany the long-answer questions already appearing in Foundations for Scientific Investing. The long-answer questions are repeated here also, giving a total of more than 500 test questions. The suggested solutions to the multiple-choice and short-answer questions appear here and are also available, free of charge, at the Web site for the book.
How to Ace Your Business Finance Class ACE3 This pocket-sized book is aimed at students in their first finance class at the undergraduate, MBA, or executive education level. He uses 25 years of experience teaching this material to explain carefully the stumbling blocks that have consistently tripped up students year after year. He also presents safe strategies he has developed to help you solve numerical problems. The fact that he focuses on essential knowledge and techniques also makes this book useful to instructors.
Pocket Heard on The Street (Red) HOTSred Selected quantitative questions and answers from Heard on The Street.
Pocket Heard on The Street (Yellow) HOTSyellow Selected brainteasers, thinking questions, and non-quant questions from Heard on The Street.
Basic Black-Scholes 2014 (3rd Ed.) BBS3 How to understand Black-Scholes option pricing theory and how to use the formula to trade. Based on Prof. Crack's award-winning teaching at Indiana University. He walks you through Black-Scholes pricing and discuss practical matters that must be taken into account if you wish to use the Black-Scholes formula when trading options.

Latest Journal Publications

  • “Price and Earnings Momentum, Transaction Costs, and an Innovative Practitioner Technique” International Review of Finance, 2015, (with Reza Tajaddini and Helen Roberts, Accepted August 2015). Published Online
  • “Credit Card Balances and Repayment under Competing Minimum Payment Regimes,” Review of Quantitative Finance and Accounting, 2014, (with Helen Roberts, Accepted April 2014). Published Online
  • "Characterising limit order prices", Physica A: Statistical Mechanics and its Applications (with Rasika M. Withanawasam and Peter A. Whigham). Accepted June 2013. Published Online
  • "Credit Cards, Excess Debt, and the Time Value of Money,” Journal of Financial Education (with Helen Roberts). Spring2015, Vol. 41 Issue 1, p117-137.
  • “Characterising Trader Manipulation in a Limit-Order Driven Market,” Mathematics and Computers in Simulation 2013 (with Rasika M. Withanawasam and Peter A. Whigham). Published Online
  • “Do Momentum-Based Trading Strategies Work in Emerging Currency Markets?” Journal of International Financial Markets, Institutions and Money 2012, Vol. 22 No. 3, pp521–537 (with Reza Tajaddini). Published Online
  • “Growth Beats Value on the Bombay Stock Exchange” Finance India June 2012 (Vol XXVI, No 2) pp421–438 (with Satneet Sabharwal). [Note: Lead article in the journal.] Acknowledged Online

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Publications

Crack, T. F., & Roberts, H. (2015). Credit card balances and repayment under competing minimum payment regimes. Review of Quantitative Finance & Accounting, 45(4), 785-801. doi: 10.1007/s11156-014-0455-3

Tajaddini, R., Crack, T. F., & Roberts, H. (2015). Price and earnings momentum, transaction costs, and an innovative practitioner technique. International Review of Finance, 15(4), 555-597. doi: 10.1111/irfi.12065

Crack, T. F., & Roberts, H. (2015). Credit cards, excess debt, and the time value of money: The parable of the debt banana. Journal of Financial Education, 41(1), 117-137.

Crack, T. F. (2014). Foundations for scientific investing: Capital markets intuition and critical thinking skills. Dunedin, New Zealand: Timothy Falcon Crack, 484p.

Crack, T. F. (2014). Pocket heard on the street: Quantitative questions from finance job interviews. Dunedin, New Zealand: Timothy Crack, 196p.

Authored Book - Research

Crack, T. F. (2004). Basic Black-Scholes: Option pricing and trading. Lavergne, TN: Author, 296p.

Crack, T. F. (2004). Heard on the street: Quantitative questions from Wall Street job interviews (9th ed.). Lavergne, TN: Author, 280p.

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Authored Book - Other

Crack, T. F. (2014). Foundations for scientific investing: Capital markets intuition and critical thinking skills. Dunedin, New Zealand: Timothy Falcon Crack, 484p.

Crack, T. F. (2014). Pocket heard on the street: Quantitative questions from finance job interviews. Dunedin, New Zealand: Timothy Crack, 196p.

Crack, T. F. (2014). Foundations for scientific investing: Capital markets intuition and critical thinking skills (3rd ed.). Dunedin, New Zealand: Timothy Falcon Crack, 491p.

Crack, T. F. (2014). Foundations for scientific investing: Capital markets intuition and critical thinking skills (2nd ed.). Dunedin, New Zealand: Timothy Falcon Crack, 484p.

Crack, T. F. (2014). Foundations for scientific investing: Multiple choice, short-answer, and long-answer test questions. Dunedin, New Zealand: Timothy Falcon Crack, 204p.

Crack, T. F. (2014). Pocket heard on the street: Brain teasers, thinking questions, and non-quantitative questions from finance job interviews. Dunedin, New Zealand: Timothy Crack, 102p.

Crack, T. F. (2014). Heard on the street: Quantitative questions from Wall Street job interviews (15th ed.). Dunedin, New Zealand: Timothy Falcon Crack.

Crack, T. F. (2014). Basic Black-Scholes: Option pricing and trading (3rd ed.). Dunedin, New Zealand: Timothy Falcon Crack, 264p.

Crack, T. F. (2009). Basic Black-Scholes: Option pricing and trading (2nd ed.). Dunedin, New Zealand: Timothy Falcon Crack, 236p.

Crack, T. F. (2008). Heard on the street: Quantitative questions from Wall Street job interviews (11th ed.). Dunedin, New Zealand: Timothy Falcon Crack, 270p.

Crack, T. F. (2007). Heard on the street: Quantitative questions from Wall Street job interviews (10th ed.). Dunedin, New Zealand: Timothy Falcon Crack, 268p.

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Chapter in Book - Research

Arnold, T., Crack, T. F., & Schwartz, A. (2011). Inferring risk-averse probability distributions from option prices using implied binomial trees. In G. N. Gregoriou & R. Pascalau (Eds.), Financial econometrics modeling: Derivatives pricing, hedge funds and term structure models. (pp. 35-52). Basingstoke, UK: Palgrave Macmillan.

Crack, T. F., & Nawalkha, S. K. (2005). Common fallacies concerning duration and convexity. In S. K. Nawalkha, G. M. Soto & N. A. Beliaeva (Eds.), Interest rate risk modeling: The fixed income valuation course. (pp. 27-43). Hoboken, NJ, USA: John Wiley & Sons.

Crack, T. F., & Ledoit, O. (2002). Robust structure without predictability: The ″compass rose″ pattern of the stock market. In T. C. Mills (Ed.), Forecasting financial markets: The international library of critical writings in economics. (pp. 751-762). Edward Elgar Pub Published.

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Journal - Research Article

Crack, T. F., & Roberts, H. (2015). Credit card balances and repayment under competing minimum payment regimes. Review of Quantitative Finance & Accounting, 45(4), 785-801. doi: 10.1007/s11156-014-0455-3

Crack, T. F., & Roberts, H. (2015). Credit cards, excess debt, and the time value of money: The parable of the debt banana. Journal of Financial Education, 41(1), 117-137.

Tajaddini, R., Crack, T. F., & Roberts, H. (2015). Price and earnings momentum, transaction costs, and an innovative practitioner technique. International Review of Finance, 15(4), 555-597. doi: 10.1111/irfi.12065

Withanawasam, R. M., Whigham, P. A., & Crack, T. F. (2013). Characterizing limit order prices. Physica A, 392(21), 5346-5355. doi: 10.1016/j.physa.2013.06.060

Sabharwal, S. K., & Crack, T. F. (2012). Growth beats value on the Bombay Stock Exchange. Finance India, XXVI(2), 421-438.

Tajaddini, R., & Crack, T. F. (2012). Do momentum-based trading strategies work in emerging currency markets? Journal of International Financial Markets, Institutions & Money, 22(3), 521-537. doi: 10.1016/j.intfin.2012.02.002

Crack, T. F., & Ledoit, O. (2010). Central limit theorems when data are dependent: Addressing the pedagogical gaps. Journal of Financial Education, 36, 38-60.

Trethewey, S., & Crack, T. F. (2010). Price momentum in the New Zealand stock market: A proper accounting for transactions costs and risk. Accounting & Finance, 50(4), 941-965. doi: 10.1111/j.1467-629X.2010.00355.x

Arnold, T., Crack, T. F., & Schwartz, A. (2007). Valuing real options using implied binomial trees and commodity futures options. Journal of Futures Markets, 27(3), 203-226.

Arnold, T., Crack, T. F., & Schwartz, A. (2006). Implied binomial trees in Excel without VBA. Journal of Financial Education, 32, 37-54.

Arnold, T., Butler, A. W., Crack, T. F., & Zhang, Y. (2005). The information content of short interest: A natural experiment. Journal of Business, 78(4), 1307-1335.

Butler, A. W., & Crack, T. F. (2005). The academic job market in finance: A rookie's guide. Financial Decisions, 17(2). Retrieved from http://www.financialdecisiononline.org/specialissue2005_index.html

Arnold, T., & Crack, T. F. (2004). Using the WACC to value real options. Financial Analysts Journal, 60(6), 78-82.

Arnold, T., Butler, A. W., Crack, T., & Altintig, A. (2003). Impact: What influences finance research? Journal of Business, 76(2), 343-361.

Crack, T. F., & Nawalkha, S. K. (2001). Common misunderstandings concerning duration and convexity. Journal of Applied Finance, 11(1), 82-92.

Crack, T. F., & Nawalkha, S. K. (2000). Interest rate sensitivities of bond risk measures. Financial Analysts Journal, 56(1), 34-43.

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Conference Contribution - Published proceedings: Full paper

Withanawasam, R. M., Whigham, P. A., & Crack, T. F. (2013). Characterising trader manipulation in a limit-order driven market. Mathematics & Computers in Simulation, 93, (pp. 43-52). doi: 10.1016/j.matcom.2012.09.012

Crack, T. F., & Roberts, H. (2013). Credit cards, excess debt, and the time value of money: The parable of the debt banana. Proceedings of the New Zealand Finance Colloquium. Retrieved from http://www.nzfc.ac.nz/archives/2013/programme/

Whigham, P. A., Withanawasam, R., Crack, T., & Premachandra, I. M. (2010). Evolving trading strategies for a limit-order book generator. Proceedings of the IEEE Congress on Evolutionary Computation (CEC). (pp. 2467-2474). doi: 10.1109/CEC.2010.5586114

Arnold, T., Crack, T. F., & Schwartz, A. (2006). Valuing real options using implied binomial trees and commodity futures options. Proceedings of the 10th Annual New Zealand Finance Colloquium. Retrieved from http://www.nzfc.ac.nz/archives/2006/Schedule_HelpDesk.htm

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Conference Contribution - Published proceedings: Abstract

Withanawasam, R., Whigham, P. A., Crack, T. F., & Premachandra, I. M. (2010). Characterizing abnormal behaviors in stock markets. Proceedings of the Information Science Postgraduate Day. (pp. 31-32). Retrieved from http://infosci.otago.ac.nz/information-science-postgrad-day-2010/

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Design

Crack, T. F. (2002). APT plane for two-factor model. In J. Francis & R. Ibbotson (Eds.) Investments: A global perspective (p. 459). Upper Saddle River, NJ, USA: Prentice Hall. Upper Saddle River, NJ, USA: Prentice Hall.

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Working Paper; Discussion Paper; Technical Report

Withanawasam, R. M., Whigham, P. A., Crack, T., & Premachandra, I. M. (2010). An empirical investigation of the Maslov limit order market model [Information Science Discussion Paper: No. 2010/04]. Dunedin, New Zealand: Department of Information Science, University of Otago. 49p.

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Other Research Output

Crack, T. (2003). [Contribution of software to Black-Scholes takes over the HP12C (or HP 38C) by T. Hutchins]. HPCC Datafile, 22(3) 13-21. [Software contribution to journal article].

Crack, T. (2003). [Contribution to Logic problems for money minds by P. Jenks & M. Hunt (Eds.)] Petersfield, England: Harriman House. 1-80. [Other Research Output].

More publications...