FGV EPGE discusses "Financial Mathematics and the Judicial System"

Last Tuesday, October 22nd, FGV EPGE – Escola Brasileira de Economia e Finanças - welcomed Professor Clovis de Faro - professor of the School and Advisor to FGV's Presidency - for the lecture "Financial Mathematics and the Judicial System", within the "Contemporary Issues" series. The event took in the auditorium of the 12th floor of FGV's headquarters in Rio de Janeiro.
Professor Clovis de Faro explained that the Brazilian legislation opposes the use of compound interest in financing contracts, such as mortgages and loans. Based on this principle, many recent judicial decisions have favored the replacement of the widely used Price Table by a system that uses simple interests. Contrary to the court understanding, the lecturer argued that the Price Table does not entail compound interests from the debtor perspective as far as that there is no delayed installment. This is because installments typically cover the interest dues, which are then never added to the debt principal. Prof. de Faro also stressed that any method based on the simple interest system is not robust to changes in the original payment schedule. This presents a serious concern when considering debt contracts lasting for more than one period.
Besides Professor Clovis, EPGE professors Marcelo Moreira and Paul Klinger, the directors of undergraduate studies, Luis Braido and André Villela, and EPGE's General Director, Rubens Penha Cysne participated in the lecture. Professors Afonso Arinos de Mello Franco Neto, Ricardo Cavalcanti and Luiz Guilherme Schymura were also at the lecture.
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