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Practitioners’ Seminar 2013

The Spring 2013 Practitioners’ Seminar is now closed. A big Thank You to all the speakers. We will return in the Spring of 2014.

Organizer: Lars Tyge Nielsen

Schedule of Presentations

Tuesday, Jaunary 22, 2013

Speaker: Adrien Sauvagnat, Murex

Title: Life Settlements

Summary
Despite being very young, the Life Settlement Market represents today an interesting opportunity as an alternative investment with low correlation to other traditional financial markets. This presentation starts with a description of Life Insurance products and how they may be turned by investors into a financial product: Life Settlements. Then we go into more details about the longevity underwriting and pricing of life insurance contracts, and we conclude with the specific problematic related to this asset class when aggregated with the purpose of creating a ‘buy & hold’ investment fund.
Thursday, Januar 24, 2013

Speaker: Mark Higgins, J.P. Morgan.
Managing Director. Currently an FX Options trader. Co-headed JPM’s Investment Bank Quantitative Research group for 2 years; 17 years total in quantitative roles on trading desks. PhD in astrophysics from Queen’s University in Kingston, Canada.

Title: Industry Overview – What it is Really Like to Be a Quant

Summary
An introduction to the different trading models at investment banks with a focus on OTC derivatives trading and agency execution, the move to electronic trading in those markets, and how quants fit into those businesses and what they do day to day. Also a few words about the impact of regulatory changes on the OTC derivatives markets.
Tuesday, January 29, 2013

Speaker: Douglas Dwyer, Moody’s Analytics
Douglas W. Dwyer, Managing Director, heads the Single Obligor Research Group in the Moody’s Analytics Quantitative Research Group. This group produces credit risk measures of corporations and financial institutions worldwide. The group’s models are used by banks, asset managers, insurance companies, accounting firms and corporations to measure name specific credit risk for a wide variety of purposes. We measure credit risk using information drawn from a mixture of financial statements, regulatory filings, security prices and derivative contracts. For each asset class, the methodology is developed based on the available information for each obligor. Recent research includes deriving a physical default probability from CDS spreads, updating our LGD model and extending coverage of RiskCalc models to include private firms in emerging markets including China and Russia. The group also designed a scorecard that incorporates qualitative and quantitative information for an improved assessment of credit risk, and extended the coverage of the private firm default models to include Not-For-Profits, Dealerships and Real Estate Operators. One current focus of the group is the application of its risk models to the stress testing of bank portfolios. Prior to working at Moody’s Analytics, Dr. Dwyer was a Principal at William M. Mercer, Inc., in their Human Capital Strategy practice. Dr. Dwyer earned a Ph.D. in Economics at Columbia University and a B.A. in Economics from Oberlin College.

Title: Structural Models of Credit Risk in Practice

Summary
This presentation will provide an overview of how a measure of credit risk can be extracted from equity markets using option pricing theory. The presentation will cover how such measures are validated and how such measures are used in practice. Applications to understanding the risk of financial firms and leveraged transactions will be discussed as well.
Thursday, January 31, 2013

Speaker: Luca Capriotti, Credit Suisse
Luca works in Quantitative Strategies (QS) in the New York city office where is US head for Global Credit Products. He is currently focusing on modeling in the areas of Flow and Structured Credit, Risk Management of a Bank’s own credit, RWA reduction strategies, and Counterparty Credit Risk Management. He is also working on developing efficient and general multi-asset pricing engines supporting fast calculation of the Greeks for which he has a Patent pending. Previous to this role, he worked in Commodities in New York and London, and was part of the cross-asset modeling R&D group in the London office.Prior to working in Finance, Luca was a researcher at the Kavli Institute for Theoretical Physics, Santa Barbara, California, working in the field of High Temperature Superconductivity and Quantum Monte Carlo methods for Condensed Matter systems. He has been awarded the Director’s fellowship at Los Alamos National Laboratory, the Wigner Fellowship at Oak Ridge National Laboratory, and he has published over 50 scientific papers, with the top 3 papers collecting to date over 500 citations. Luca holds a M.S. cum laude in General Physics from University of Florence (1996), and a M.Phil. and Ph.D. cum laude in Condensed Matter Theory, from the International School for Advanced Studies, Trieste (2000).

Title: Real Time Counterparty Credit Risk Management with Adjoint Algorithmic Differentiation (AAD)

Abstract
Adjoint algorithmic differentiation can be used can be used to implement efficiently the calculation of counterparty credit risk. We demonstrate how this powerful technique can be used to reduce the computational cost by hundreds of times, thus opening the way to real time risk management in Monte Carlo.
Tuesday, February 5, 2013

Speaker: David Fournié, Morgan Stanley
David Fournie is a Vice President and an Equity Exotics trader at Morgan Stanley, where he runs the SPX exotics and custom strategies books. He has a Ph.D. from 2010 from the Columbia University Department of Mathematics. The title of his dissertation was “Functional Ito calculus and applications.”

Title: Adressing Black-Scholes Shortcomings in Equity Options Pricing.

Abstract
We will go over some of the shortcomings of Black-Scholes pricing model and how to address them in the context of equity exotic options. After introducing the world of equity derivatives, we will consider the implied volatility skew and local volatility model, conditional distributions and stochastic volatility models, stochastic rates effect and Hull-White model.
Thursday, February 7, 2013

Speaker: Jesús Ruiz-Mata, J.P. Morgan
Jesus Ruiz-Mata is an executive director and head of portfolio analytics in Linear Quantitative Research at J.P. Morgan. Prior to joining J.P. Morgan he spent several years at Lehman Brothers and Barclays Capital performing research on risk modeling and execution and building decision making analytic tools for the Equities business. He holds a Ph.D. degree in Statistics from Columbia University in the city of New York.

Title: Portfolio Risk and Execution Analytics: Present and Future

Abstract
Portfolio analytics entails the study of the risk, return and execution characteristics of baskets with more than one asset. In this presentation, we will deal with three main topics. The first topic will cover the challenge on the estimation of the risk and exposures for portfolios, the second topic will cover the construction portfolios with optimal characteristics and the third topic will explain optimal execution of portfolios through programs or algorithms. Each of these methodologies has interesting mathematical problems associated with them that we will try to cover to some degree as well as some of the main challenges faced by practitioners
Tuesday, February 12, 2013

Speaker: Mikhail Smirnov, Columbia University

Title: Dynamic Leverage as a Generalization of Traditional VaR and its Use in Portfolio Construction

Download the paper from SSRN

Abstract
Dynamic leverage is a risk measure generalizing traditional value at risk type measures. This measure is suited for hedge funds and can be applied to quantify risk in a fund of hedge funds. Dynamic leverage depends on the level of fund volatility, time horizon and distance in terms of NAV to a pre-defined critical liquidation level for a fund.Thus dynamic leverage incorporates the minimal holding time of investment and the risk associated with it. This reflects the fact that investments in hedge funds have lockups and limited redemption frequency. We present a variety of models for dynamic leverage to illustrate some of the differing structural features of hedge funds.We give examples of historical critical liquidation levels for hedge funds following different strategies. We study the use of dynamic leverage in a fund of funds portfolio. For a single hedge fund we study variety of derivatives of dynamic leverage and demonstrate the existence of a critical NAV below which the efficacy of de-leveraging is compromised. Finally we study a Constant Dynamic Leverage Portfolio insurance that is a modification of the classical portfolio insurance of Black-Jones-Perold.
Thursday, February 14, 2013

Speaker: Peter Carr, Morgan Stanley
Dr. Peter Carr is a Managing Director at Morgan Stanley with over 15 years of experience in the financial industry. He is currently the Global Head of Market Modeling, overseeing several quantitative teams spread over three continents. He also presently serves as the the Executive Director of the Math Finance program at NYU’s Courant Institute, the Treasurer of the Bachelier Finance Society, and a trustee for the Museum of Mathematics in New York. Prior to joining the financial industry, Dr. Carr was a finance professor for 8 years at Cornell University, after obtaining his PhD from UCLA in 1989. He has over 75 publications in academic and industry-oriented journals and serves as an associate editor for 8 journals related to mathematical finance. He was selected as Quant of the Year by Risk Magazine in 2003 and Financial Engineer of the Year by IAFE/Sungard in 2010. In 2011 and 2012, Dr. Carr was included in Institutional Investor’s Tech 50, an annual listing of the 50 most influential people in financial technology.

Title:
Swaption Smile Via Vol Dynamics (joint work with Jian Sun)
Tuesday, February 19 — Tuesday, March 12

Lecture Series by Rick Klotz

Rick Klotz was Managing Director and Head of Market Risk Management for RBS Greenwich Capital. During his more than 20 years on Wall Street, Rick headed fixed income trading desks, research deparments, and risk management departments at leading firms such as First Boston, Merrill Lynch, Salomon Brothers and Greenwich Capital Markets. Prior to beginning his investment banking career in 1984, Rick was Ritt Assistant Professor of Mathematics at Columbia University. Rick holds a B.A .in mathematics from Harvard University and a Ph. D. in mathematics from Stanford University.

US Fixed Income Markets

This set of lectures grew out of a series of talks given at Greenwich Capital intended to give an overview of the Fixed Income markets. The lectures will focus on instruments traded in the market, common trading strategies, methods of valuing securities, risk measures, and market terminology. In the process we will discuss the roles of traders and salepeople at investment banks as well as the origins of the mortgage crisis and its impact on fixed income markets.
Tuesday, February 19, 2013

Speaker: Rick Klotz

Title: The Role of Investment Banking in the US Bond Market
Thursday, February 21, 2013

Speaker: Rick Klotz

Title: Bond Math
Tuesday, February 26, 2013

Speaker: Rick Klotz

Title: Forward Pricing and Options
Thursday, February 28, 2013

Speaker: Rick Klotz

Title: The Government, Agency, and Corporate Markets
Tuesday, March 5, 2013

Speaker: Rick Klotz

Title: The Government, Agency, and Corporate Markets (continued); The Mortgage and Asset Backed Markets
Thursday, March 7, 2013

Speaker: Rick Klotz

Title: The Mortgage and Asset Backed Markets (continued)
Tuesday, March 12, 2013

Speaker: Rick Klotz

Title: Fixed Income Derivative Products
Thursday, March 14, 2013

Speaker: Bjorn Flesaker, Prudential Fixed Income.
Bjorn Flesaker is Managing Director and Head of Quantitative Research at Prudential Fixed Income, where he is responsible for research and modeling for both risk management and relative value purposes. Prior to joining Prudential in 2010, he worked in R&D and fixed income business management at Bloomberg. Bjorn has managed derivatives oriented quant groups for several institutions, including Morgan Stanley, Bear Stearns and Merrill Lynch, and he was an Assistant Professor of Finance at the University of Illinois at Urbana-Champaign. He currently serves as Managing Editor of the International Journal of Theoretical and Applied Finance and is an adjunct instructor at NYU’s Courant Institute of Mathematical Sciences. Bjorn holds a first degree from the Norwegian School of Management and a PhD in Finance from the University of California — Berkeley.

Title: Quantitative methods in credit portfolio management

Abstract:
We will discuss some analytical tools and techniques for modeling credit risky instruments in the context of managing a fixed income portfolio against a benchmark. We will consider a way to quantify systematic credit risk, the use of a simple structural credit model, and a specific model to handle the embedded interest rate and spread options in high yield bonds and leveraged loans.
Tuesday, March 19, 2013 — Spring Recess, no seminar
Thursday, March 21, 2013 — Spring Recess, no seminar
Tuesday, March 26 — Tuesday, April 9

Lecture Series by Amal Moussa, J.P. Morgan

Amal Moussa is currently a front office quantitative associate in the Global Emerging Markets group at JP Morgan. She holds a Ph.D. in Statistics from Columbia University (New York, 2011), a Masters in Probability and Finance from the Paris 6 University (Paris, 2006) and an Engineering degree in Computer Science from the Ecole Nationale Superieure des Telecommunications (Paris, 2006).

Pricing and Risk Management in the Aftermath of the 2008 Crisis

Motivation

The 2008 crisis has led to important changes in the financial industry both in the types of the products traded and in the methodologies used to valuate and risk-manage them. The aim of this lecture series is to present some of the new techniques developed to address this evolution.

Implied Volatility has emerged as a new asset class on its own with an increasing liquidity in VIX futures, options and ETNs. It has been then necessary to model consistently Equity indices and their own implied volatilities, which traditional local and stochastic volatility models fail to achieve.

As funding started to dry up for banks, properly accounting for the cost of funding their over-the-counter trades started to become a major issue. These trades are typically funded from the collateral posted against them. Any two counterparties define in a credit support agreement (CSA) the terms of the collateral exchange between them, which results in a specific cost of funding for their trades. Banks had to find out how to properly transition from discounting all trades at vanilla swap rates to a new era where each trade is discounted at the proper curve depending on the specific counterparty, a new area of financial modeling known as “differential discounting”.

The crisis has also shed light on the importance of contagion and systemic risk, and revealed the lack of adequate indicators for measuring and monitoring them. The traditional regulatory framework for determining systemically important institutions has been to rank them in terms of the size of their balance sheet. Institutions with the largest balance sheet size are declared “too big to fail”. Instead, there is a need to implement a metric of systemic importance that combines the effects of both common market shocks and contagion through counterparty exposures.

Outline

  1. Volatility Modeling
    1. Estimation of historical volatility
    2. Implied volatility and smile dynamics
    3. Local volatility and stochastic volatility models
    4. Volatility swaps, variance swaps
    5. VIX, VIX Futures and ETNs, Options on VIX
  2. Pricing with Differential Discounting
    1. The rate market post 2008: OIS-LIBOR basis, tenor basis, counterparty risk and collateral
    2. Projection and discount curves construction
    3. Pricing bonds, FRAs, swaps and options with differential discounting
    4. Change of numeraire and convexity adjustment
  3. Statistical Methods in Risk Management
    1. Brief introduction to Basel Accords
    2. Measuring contagion and systemic risk
    3. Credit value adjustment (CVA)
    4. Extreme value theory and fat tails
Tuesday, March 26, 2013

Speaker: Amal Moussa, J.P. Morgan

Title: Volatility Modeling I
Thursday, March 28, 2013

Speaker: Amal Moussa, J.P. Morgan

Title: Volatility Modeling II
Tuesday, April 2, 2013

Speaker: Amal Moussa, J.P. Morgan

Title: Pricing with Differential (CSA) Discounting I
Thursday, April 4, 2013

Speaker: Amal Moussa, J.P. Morgan

Title: Pricing with Differential (CSA) Discounting II
Tuesday, April 9, 2013

Speaker: Amal Moussa, J.P. Morgan

Title: Statistical Methods in Risk Management I
Thursday, April 11, 2013

Speaker: Amal Moussa, J.P. Morgan

Title: Statistical Methods in Risk Management II
Tuesday, April 16, 2013

Speaker: Jesús Ruiz-Mata, J.P. Morgan
Jesus Ruiz-Mata is an executive director and head of portfolio analytics in Linear Quantitative Research at J.P. Morgan. Prior to joining J.P. Morgan he spent several years at Lehman Brothers and Barclays Capital performing research on risk modeling and execution and building decision making analytic tools for the Equities business. He holds a Ph.D. degree in Statistics from Columbia University in the city of New York.

Title: Dynamic parameter estimation using filtering and its potential use in Algorithmic trading

Abstract
This talk will provide an introduction to the methodology of filtering with a particular emphasis on non linear models. We’ll build up on this methodology to address the problem of the estimation of the posterior distribution of hidden variables and parameters. Using this, we propose a solution to the challenge of dynamically estimating the distribution of market microstructure variables used in the decision making process for algorithmic trading.
Thursday, April 18, 2013

Speaker: Yury Blyakhman, J.P. Morgan
Yury Blyakhman heads Quantitative Research for Emerging Markets at JPMorganChase. Yury holds Ph.D. in Physics from NYU and after graduation spent 3 years doing Fixed Income research at BNP Paribas. For last 9 years Yury has been at JPMorgan as an Emerging Markets quant. Main areas of interest and expertise are Latin America Markets and Inflation.

Title: Mathematical Modeling in Emerging Markets. Practical Aspects.

Summary
The talk will try to cover peculiarities of quantitative modeling in finance in application to Emerging Markets. We will go over the underlying economics and will try to compare standard (familiar) quantitative finance aspects in G10 countries to their applications in EM. In particular: special Brazil conventions, Latin America Inflation, Hybrid nature of vanilla instruments in EM, and many more.
Tuesday, April 23, 2013

Speaker: Daniel Nehren, J.P. Morgan
Daniel Nehren is the Global Head of Linear Quantitative Research at J.P. Morgan. LQR is a global quantitative group that focuses on both electronic trading and portfolio and risk analytics for the Equities Division. Prior to joining J.P. Morgan, he was the co-head of the Quantitative Products One group at Deutsche Bank and helped run the QP Lab, a research joint venture with 2 major Berlin Universities: Humbolt University and Technische Universität Berlin. Daniel spent the previous 5 years in Delta 1 Equity Strategies at Goldman Sachs focused on High Frequency Trading. He holds the title of Doctor in Electronic Engineering from the Politecnico University in Milan, Italy.

Title: Electronic Trading from the quant perspective: current state and open questions

Abstract
This talk provides an brief introduction of Electronic Trading and its role in the Investment Process. The focus would be on the areas where quantitative researcher are involved and will provide a view of the state-of-the art, recent evolution, and open questions that would benefit from academic research.
Thursday, April 25, 2013

Speaker: Karen Pham Van, Balestra Capital
Ms. Pham Van joined Balestra Capital in 2010 as the Director of Risk Management. She is part of the investment team of the fund, participating in all decisions leading to the fund’s positioning and hedging. Previously, Ms. Pham Van was at Société Generale from 2000 through December 2009, as a Vice President and Senior Quantitative Analyst. In this role, Ms. Pham Van was responsible for modeling Credit VaR (replacement risk) for all exotic derivatives traded in the AMER platform including: equity (complex options, swaps, repos & other non-vanilla) interest rates, (locks, swaps, complex options, etc.) FX, Commodities (swaptions, forward strips, physical trading, etc.) Credit Products, (first to default, CDSs, CDOs) and all structured transactions involving cross-over between all areas. Previously, Ms. Pham Van was a Vice President & Senior Portfolio Analyst in Société Generale’s Credit Risk Department. Ms. Pham Van holds a Masters in Management from EDHEC Business School in France and a Masters of Arts in Mathematics of Finance from Columbia University.

Title: Convexity and Correlations Risk at a Global Macro Hedge Fund
Tuesday, April 30, 2013

Speaker: Ayman Hindy, Capula Investment Management
Ayman Hindy is a partner of Capula Investment Management LLP and senior portfolio manager focused on macro and interest rate trading in global markets with an emphasis on the U.S. Ayman joined Capula Investment US LP in January 2010. From 1999 to 2009, Ayman was a partner and portfolio manager at Platinum Grove Asset Management where he traded macro, emerging markets and interest rate products, including agency mortgage versus interest rates. From 1994 to 1999, he was a senior strategist responsible for fixed income trading and research at Long Term Capital Management. Ayman was an associate professor in finance at Stanford Graduate School of Business from 1990 to 1994.

BS (with highest Honours), Cairo University, 1983 MS, Department of Civil Engineering, Massachusetts Institute of Technology, 1987 PhD Financial Economics, Sloan School of Management, Massachusetts Institute of Technology, 1990


Title: Systemic failure and the global financial crisis of 2008

Abstract
We will discuss the economics of leveraged entities and analyze the system that arises when they are connected. We will try to understand the economic incentives for creating such a structure. We then discuss the instabilities of leveraged systems and the risks they face and impose on the real economy. We will address the policy response when instabilities develop. In addition, we will tell tales from the trenches of the 2008 crisis
Thursday, May 2, 2013

Speaker: Ali Hirsa, Sauma Capital, LLC

Ali Hirsa is managing partner at Sauma Capital, LLC. Previously he was partner and head of analytical trading strategy at Caspian Capital Management, LLC. Prior to joining Caspian, Ali worked as a quant at Morgan Stanley, Banc of America Securities, and Prudential Securities. He is also an adjunct associate professor of financial engineering at Columbia University since 2000 and Courant Institute of New York University in the mathematics of finance program since 2004.

Ali is the author of Computational Methods in Finance, Chapman & Hall/CRC 2012 and the co-author of An Introduction to Mathematics of Financial Derivatives, Academic Press 2013 and is the editor of Journal of Investment Strategies. He has several publications and is a frequent speaker at academic and practitioner conferences.

Ali received his Ph.D. in applied mathematics from University of Maryland at College Park under the supervision of Professors Howard C. Elman and Dilip B. Madan. He currently serves as a trustee at University of Maryland College Park Foundation.


Title: Risk Control in Algorithmic Trading
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