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The Thalesians
The Thalesians are a think tank of dedicated professionals with an interest in quantitative finance, economics, mathematics, physics, computer science, and synergetics, not necessarily in that order.
The group was founded in September, 2008, by Paul Bilokon (then a quantitative analyst at Lehman Brothers specialising in foreign exchange, and a part-time researcher at Imperial College), and two of his friends and colleagues: Matthew Dixon (then a quantitative analyst at Deutsche Bank) and Saeed Amen (then a quantitative strategist at Lehman Brothers).
Among the first presenters in the Thalesian seminar series — a social convergence point for the group — were Prof. Claudio Albanese and Prof. Berc Rustem. Dominic Connor continues to help our group and is a regular guest at our seminars. In our turn, we often appear on his Quant Finance group on LinkedIn.
We are also affiliated with the Open Finance Club (London) run by Thomas Barker.
The Thalesians were originally based in London, UK. In January, 2011, the organisation became truly global when Matthew Dixon brought it to the United States where he runs the Thalesians NYC seminars with the assistance of local organizer Shu-Wie Chen.
Our Philosophy
We are named after Thales of Miletus (Θαλῆς ὁ Μιλήσιος), a pre-Socratic Greek philosopher who lived in ca. 625 BC-ca. 546 BC. Thales was a mathematician and is familiar to many secondary school students for one of his theorems in geometry.
But more relevantly to us, he was one of the first users of options:
"Thales, so the story goes, because of his poverty was taunted with the uselessness of philosophy; but from his knowledge of astronomy he had observed while it was still winter that there was going to be a large crop of olives, so he raised a small sum of money and paid round deposits for the whole of the olive-presses in Miletus and Chios, which he hired at a low rent as nobody was running him up; and when the season arrived, there was a sudden demand for a number of presses at the same time, and by letting them out on what terms he liked he realised a large sum of money, so proving that it is easy for philosophers to be rich if they choose, but this is not what they care about." — Aristotle, Politics, 1259a.
The morale of this anecdote is that it is easy for philosophers to be rich if they choose; the famous Milesian went ahead and proved it.
We, the Thalesians, admire him for that. But we also share many of his values, for example his core belief that a happy man is defined as one "ὁ τὸ μὲν σῶμα ὑγιής, τὴν δὲ ψυχὴν εὔπορος, τὴν δὲ φύσιν εὐπαίδευτος" (who is healthy in body, resourceful in soul and of a readily teachable nature).
This wiki was created to serve as a source of information on quantitative finance, to collate references to various related resources, and to serve as a convergence point for the Thalesians, our colleagues and collaborators. It grew out of Paul Bilokon's finance wiki, which he started in February, 2007.
We believe that secrecy and fidelity are important in the world of finance. But we also acknowledge the power of information sharing in open societies. Let your business logic remain a closely guarded secret. But release everything else into the public domain. What goes around, comes around; this will ultimately spare you reinventing the wheel.
Forthcoming Events
Thalesian Seminar (London) — Dr. Iain Clark — Foreign Currency Options: Deltas, Market Conventions and Volatility Smiles
Date and Time
7:30 p.m. on Wednesday, 25th January, 2012.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/48672562/
Abstract
Foreign currency as an asset class is noted by the presence of not one but two possible numeraires: the so-called domestic and foreign currencies. Since market participants can regard the risk free money market account in either of these currencies as their natural numeraire, the risk-neutral option pricing technique can proceed in one of two ways: either we price options on the foreign currency from the domestic investor’s point of view, or we price options on the domestic currency from the foreign investor’s point of view.
In this talk we show using the standard Black-Scholes model that the two approaches are mathematically equivalent in price terms, which is reassuring. It means that investors in both domestic and foreign economies will naturally agree on the model price. However, unless volatilities are negligible they will absolutely not agree on the risk numbers, in particular the delta (which can be either spot delta or forward delta). This is of particular importance in foreign currency options, which naturally have volatility surfaces described using strangles and risk reversals expressed in terms of deltas -- most commonly 25- and 10-delta. It turns out that the discrepancy is directly related to which currency the premium for the option is paid in, a cashflow which will naturally be regarded as risky for one investor but riskless for the other.
We conclude by giving an overview of the way in which FX volatility surfaces are constructed, taking into account the ATM backbone, single-vol broker strangles and risk reversals – where we see the surprising feature that a convex smile can have a small and even negative broker strangle if the skew is large enough.
Speaker
Iain Clark has over 13 years experience as a front office quant. He is Head of FX Quantitative Analysis at Unicredit. He has previously worked at Standard Bank as Head of FX and Commodities Quantitative Analysis, Dresdner Kleinwort, Lehman Brothers, BNP Paribas and JP Morgan.
Iain has a PhD in applied mathematics from Queensland University and a MSc in financial mathematics from Edinburgh and Heriot-Watt Universities. He still writes his own code.
His book Foreign Exchange Option Pricing: A Practitioner's Guide was published in November 2010 by Wiley Finance.
Video
To be published here
Slides
To be published here
Thalesian Seminar (San Francisco) — Dr. Jose Menchero — Eigenfactor risk adjustments
Date and Time
7:00 p.m. on Wednesday, 25th January, 2012.
Venue
rm TBC GGU, 536 Mission St, San Francisco
Meetup.com
You can register and pay for this event on Meetup.com: http://events.thalesians.com/events/43895632/
Abstract
The Markowitz mean-variance framework provides the foundation for modern portfolio theory. One problem with this approach, however, is that sample covariance matrices tend to underestimate the true risk of optimized portfolios. In this presentation, we show that the biases of optimized portfolios are closely related to biases in eigenfactor portfolios. We present a methodology for estimating the biases in eigenfactor volatilities, and for adjusting the covariance matrix to remove such biases. We show that by removing the biases of the eigenfactors, we effectively remove the biases of optimized portfolios as well. We also examine the out-of-sample performance of optimized portfolios. Relative to the conventional sample covariance matrices, we find that the eigen-adjusted covariance matrices produce portfolios with lower out-of-sample volatilities.
Speaker
Jose Menchero is Executive Director and Head of Equity Factor Model Research at MSCI. Mr Menchero manages a global team of researchers and is responsible for the continuous development and improvement of equity factor risk models. He and his team also develop portfolio analytics for return and risk attribution.
Before joining MSCI, Mr Menchero was Head of Quantitative Research at Thomson Financial, where he worked on performance attribution, risk attribution, and factor risk modeling. Mr Menchero has several publications in these areas. Prior to entering finance, Mr Menchero was a Professor of Physics at the University of Rio de Janeiro, Brazil. His area of research was in the Quantum Theory of Solids, and he also has several publications in this field.
Mr Menchero serves on the Advisory Board of the Journal of Performance Measurement. He holds a BSc degree in Aerospace Engineering from the University of Colorado at Boulder, and a PhD degree in Theoretical Physics from the University of California at Berkeley. Mr Menchero is also a CFA charterholder.
MSCI Inc. is a publicly traded company (NYSE: MSCI) and a leading global provider of investment decision support tools, including indices and portfolio risk and performance analytics. MSCI has clients in over 60 countries, and more than 2,000 employees located around the world.
Video
To be published here
Slides
To be published here
Resources
Jose Menchero, Jun Wang and D.J. Orr, Eigen-Adjusted Covariance Matrices [1], MSCI Barra Research Paper No. 2011-14
Jose Menchero, Andrei Morozov and Peter Shepard, Global Equity Risk Modeling, book chapter in the Handbook of Portfolio Construction [2], Part II, pp. 439-480, 2010
Thalesian Seminar (New York) — Dr. Harvey Stein — Counterparty Risk, CDS & CCDS
Date and Time
6:00 p.m. on Tuesday, 31st January, 2012.
Venue
New York Public Library - Science, Industry, and Business, 188 Madison Ave, New York, NY. Please enter and leave the building at 188 Madison Avenue. Signs will direct you to the conference room on the lower level.
Meetup.com
Members can register for this event on Meetup.com: http://events.thalesians.com/events/46670242/
Abstract
Despite the recent market upheavals, the OTC derivatives markets continue to comprise one of the largest components of the financial markets, with an overall outstanding notional of $547 trillion in December 2008, 70% of which are in interest rate derivatives. As of June 2009, this grew to $605 trillion. And in spite of market contractions, gross values in the OTC markets are up. From June 2008 to December 2008, OTC gross market value increased 60%, from $20 trillion to $32 trillion (Bank for International Settlements, June 2009). Interest rate derivatives’ gross market value doubled from $9 trillion to $18 trillion.
Prompted by the desire to weather or even reduce market turmoil, regulations, accounting practices and investment practices have been under reevaluation. In particular, approaches for analyzing and mitigating counterparty risk have garnered renewed interest. Regulators have been advocating greater usage of clearing houses. Accounting boards have been refining and codifying fair market valuation, placing additional emphasis on careful consideration of counterparty risk. The IASB has even issued a request for comment on counterparty risk calculation methodologies. And investors and traders have been trying to better factor some notion of counterparty risk into their trading and risk management practices.
Here we will investigate the notion of counterparty risk and the associated counterparty valuation adjustment (CVA) in the fixed income markets. We will outline the CVA calculation, detail the underlying model assumptions, give examples of the calculation and discuss the impact the CVA has in the value of these instruments, relating CVA calculations to CDS & CCDS (contingent CDS).
Speaker
Harvey Stein is the Managing Director of Counterparty and Credit Risk at Bloomberg LP. Dr. Stein graduated from Worcester Polytechnic Institute in 1982 with a Bachelor's degree in mathematics. After working at Bolt, Beranek and Newman for three years on developing and designing the precursor to the Internet, Dr. Stein went to graduate school at the University of California, Berkeley, where he studied arithmetical geometry while working at Wells Fargo Investment Advisors. He received his PhD in mathematics from Berkeley in 1991. He's worked at Bloomberg for the last seventeen years where he built one of the top quantitative finance research and development groups in the industry, supplying derivative securities valuation models for interest rate derivatives, mortgage backed securities, foreign exchange, credit, equities, and commodities, and built Linux clusters to supply these valuations to Bloomberg's customers. Recently, Dr. Stein has been focusing on building Bloomberg's business in the area of counterparty credit risk modeling.
Slides
To be published here
Disclaimer
This is not an instructional program of the New York Public Library.
Recent Events
Thalesian Seminar (London) — Saeed Amen — Discussing currency hedging for bonds and equities
Date and Time
7:30 p.m. on Wednesday, 11th January, 2012.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/47054682/
Abstract
We look at the impact of currency hedging on bond and equity portfolios, comparing with unhedged returns. We also look at the concept of using short exposure in high beta G10 FX as a beta hedge for long equities positions, and we discuss the rationale for this.
Speaker
Saeed Amen is a Managing Director at Thalesians Ltd.
Saeed started his career at Lehman Brothers. He worked on the FX desk developing systematic trading models for both G10 and EM and was part of the team who developed the MarQCuS suite of models. He was also responsible for a systematic FX prop trading book and conducted research around high frequency FX including economic events. He currently works at Nomura as a Vice President in Quantitative Strategy, also in FX, developing their model infrastructure. He graduated from Imperial College with a first class honours master's degree in Mathematics and Computer Science.
Video
To be published here
Slides
To be published here
Thalesian Seminar (San Francisco) — Prof. Farshid Jamshidian — An Overview of Interest-Rate Derivatives Modeling
Date and Time
7:00 p.m. on Wednesday, 14th December, 2011.
Venue
rm 2203 GGU, 536 Mission St, San Francisco
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/40633852/
Abstract
The presentation reviews interest-rate modeling since its advent in the mid 70s, with particular focus on fixed-income derivatives and their valuation. We highlight the crucial role played by practitioners in the evolution of modeling to the present day. As we argue, the major theoretical advances were incited by traders needs and insistence on model compatibility with liquid instruments. The Gaussian, BDT, HJM, and Libor Market Models are discussed in some detail and many other models remarked on. We conclude with some outstanding issues of great practical importance that still defy a satisfactory theoretical solution.
Video
To be published here
Slides
To be published here
Resources
- Libor and Swap Market Model and Measures (1997), Finance and Stochastics 1, 293-330.
- Bond and Options Evaluation in the Gaussian Interest Rate Model (1991), Research in Finance 9, 131-170.
- Forward Induction and Construction of Yield Curve Diffusion Models (1991), Journal of Fixed Income 1(1), 62-74.
- An Exact Bond Option Formula (1989), Journal of Finance 44, 205-209.
Thalesian Seminar and Annual Festive Dinner (London) — Saeed Amen — What Drives Gold?
Date and Time
7:00 p.m. on Wednesday, 7th December, 2011.
Please note: Saeed's talk will start earlier than usual, at 7:00 p.m. At 7:45 p.m. we shall proceed to the dinner buffet. The cost of food is included in the ticket.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/40881222/
Menu
- Yorkshire puddings filled with beef and horseradish
- Open salmon sandwich served on brown bread and cream cheese
- Spicy cajun chicken chunks
- Filo pastry king prawns
- Mini sausages in honey and mustard sauce
- Mince pies and Christmas pudding
Vegetarian Options:
- Bruschetta (v) - Substitute for one of the above
- Christmas salad of mixed leaves, julian carrots, poached pears and walnuts (v)
Abstract
The price action in gold has many drivers. We discuss the various factors which impact gold, including its relationship with rates and FX. We also look at the composition of end user demand for gold. We analyse how gold trades with respect to risk sentiment and its relationship with market risk events. As well as looking at the historical behavior of gold, we also outline our view on gold for the coming year and we discuss our forecasts.
Speaker
Saeed Amen is a Managing Director at Thalesians Ltd.
Saeed started his career at Lehman Brothers. He worked on the FX desk developing systematic trading models for both G10 and EM and was part of the team who developed the MarQCuS suite of models. He was also responsible for a systematic FX prop trading book and conducted research around high frequency FX including economic events. He currently works at Nomura as a Vice President in Quantitative Strategy, also in FX, developing their model infrastructure. He graduated from Imperial College with a first class honours master's degree in Mathematics and Computer Science.
Video
To be published here
Slides
To be published here
Thalesian Seminar (London) — Dr. Boryana Racheva-Iotova — Myths and Realities — Why Many Investment Managers Are Hesitant to Implement Fat-tailed Risk Models
Date and Time
7:30 p.m. on Wednesday, 30th November, 2011.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/41180492/
Abstract
It's fact that "Black Swans" and "Fat-tails" are among the key buzz words since late 2008 and even more so recently. It's also fact that there is hesitation for many on adopting risk and portfolio management approaches that better capture the tail risk. We explore the question “Why?” Clearly people in different roles from Quants to CEO's have different views and thought processes. Some are very clear and well grounded but others are closer to myths. This talk will try to demystify what is behind those concerns and provide both quantitative views and a common-sense inventory on how these stand up as we head into 2012:
- Are Fat-tailed approaches always more conservative and do they lead to missed opportunities?
- Are Fat-tailed models technically unmanageable – model fitting, infinite variance, stability, can’t price derivatives?
- There are so many approaches proposed recently - how to distinguish which are sound and reliable? - "I have seen bizarre results..."
- The value versus complexity isn’t worth it... right?
- Does it really matter over the long-term?
- Is the practical system implementation harder?
- How to ensure acceptance within the Firm and explain to the board and investors?!...
Speaker
Boryana Racheva-Iotova is President of FinAnalytica. She leads FinAnalytica's R&D team and product development of the Cognity platform – the award winning multi-asset class risk and portfolio construction suite for investment managers. She was co-founder and CEO of the Bravo Risk Management Group and the originator of the Cognity product and its patented fat-tailed risk and optimization methodology, later acquired by FinAnalytica. Her many articles have appeared in premier scientific journals. She has over 10 years of experience in building risk management solutions and utilizing the latest analytical advancements to meet the needs of financial industry practitioners. She holds M. Sci. in Probability and Statistics at the Faculty of Mathematics and Informatics, Sofia University, and Doctor of Science degree from LMU Munich.
Video
To be published here
Slides
To be published here
Resources
- FinAnalytica's website: http://www.finanalytica.com/
Thalesian Seminar (San Francisco) — Dr. Peter Shepard — 2nd Order Risk
Date and Time
7:00 p.m. on Wednesday, 30th November, 2011.
Venue
rm 5312 GGU, 536 Mission St, San Francisco
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/40631142/
Abstract
Financial models play a critical role in the investment process, but we sometimes forget that they are just that: models. There is always a gap between the model and the true behavior of the markets. In addition to the uncertainty captured by a model, “first order risk”, there is additional risk due to uncertainty of the model itself, “second order risk”. We show that this additional source of risk is often much larger than would be expected, and we can begin to forecast this risk like more traditional sources of uncertainty.
Speaker
Peter Shepard is a Vice President and Senior Researcher at MSCI, where he works in multi-asset class research. He led development of the new Barra Integrated Model (BIM301), spanning global stocks, bonds, commodities, currencies, hedge funds, private real estate, and equity volatility futures. He was an architect of the Barra Global Equity Model (GEM2), and has done research in portfolio construction. Prior to joining MSCI, he worked in fixed income risk modeling in the quantitative research group at Thomson Financial.
Dr Shepard holds a PhD in theoretical physics from the University of California at Berkeley, where he researched string theory and the quantum theory of gravity. He has publications in theoretical physics and finance. Dr Shepard also holds a Bachelors degree in physics and mathematics from Brown University
Video
To be published here
Slides
To be published here
Resources
http://arxiv.org/abs/0908.2455
Thalesian Seminar (London) — Dr. Attila Vrabecz — kdb+/q in practice
Date and Time
7:30 p.m. on Wednesday, 16th November, 2011.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/40330252/
Abstract
This talk is going to be a follow up on last year's introduction into kdb+/q. The focus will be on efficient usage of kdb+/q with a set of selected examples ranging from NAV of a portfolio, common timeseries queries to debugging.
Speaker
Attila Vrabecz is Head of Market Data and Analytics at Marshall Wace. He has previously worked at Sun Trading, Millennium Partners, Dresdner Kleinwort and as a consultant at First Derivatives at several different investment banks. His main expertise is kdb+/q of Kx Systems. He has a PhD in Computational/Theoretical Chemistry.
Video
To be published here
Slides
To be published here
Resources
- Marshall Wace website: http://www.mwam.com/
Thalesian Seminar (London) — Dr. Cassio Neri — Introduction to the KeyValue Library
Date and Time
7:30 p.m. on Wednesday, 2nd November, 2011.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/38982082/
Abstract
Option pricing libraries developed in-house by financial institutions share many features. Specifically, most of them are Excel add-ins written in C++ that give to users the ability of instantiating objects (e.g. volatility surfaces, models, instruments, etc.) on the spreadsheet. The objects are stored in a repository and handles to these objects are returned to the spreadsheet, allowing the users to call their methods.
KeyValue is a library that helps the development of such add-ins. Additionally, the library is cross-platform and creates OpenOffice and LibreOffice extensions that work on Windows and GNU/Linux systems.
The library is named after its interface where function parameters are passed through key-value pairs in contrast to the standard positional interfaces of Excel, LibreOffice and OpenOffice. The way that pricing spreadsheets are designed makes this interface very convenient.
KeyValue is flexible and can be used in other areas. This talk is an introduction specially tailored for quants and quant-devs.
Speaker
Cassio Neri completed his Ph.D. in Applied Mathematics at University of Paris-Dauphine in 2002 advised by Prof. Pierre-Louis Lions.
After a few years lecturing Applied Mathematics at the Federal University of Rio de Janeiro, he moved to London in 2006 and became a quantitative analyst. Before joining the FX Quantitative Research Team of Lloyds Bank Corporate Markets, he worked at Dresdner Kleinwort and Commerzbank.
Cassio's research interests are applications of Statistical Mechanics and Entropic Methods to finance. He has published articles in journals on mathematics, financial mathematics and programming.
Video
To be published here
Slides
To be published here
Resources
- KeyValue website: http://keyvalue.sourceforge.net/
Thalesian Seminar (London) — Prof. Uwe Wystup — Embedded Currency Exchange Options in Roll-over Loans
Date and Time
7:30 p.m. on Wednesday, 19th October, 2011.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/36309342/
Abstract
For ship and aircraft financing long term roll-over loans are often equipped with the right to change the currency every quarter at spot. The loan taker then pays LIBOR of the respective currency plus a pre-determined constant sales margin. If the capital outstanding exceeds 105% calculated in the original currency, the amortization is required to the level of 105% of the original currency. By clever currency management the loan taker can amortize the loan faster and terminate the loan early. Essentially the loan taker owns a series of options on the cross currency basis spread with unknown notional amounts. We determine the key drivers of risk, an approach to valuation and hedging, taking into consideration the regulatory constraints of a required long term funding.
Key words: currency option, basis spread, cross currency swap, roll-over loan, derivatives valuation
Co-author: Andreas Weber, senior financial engineer at MathFinance
Speaker
Uwe Wystup completed his diploma in mathematics at the Goethe-University (Frankfurt) in 1993. He earned a Doctor of Philosophy in Mathematical Finance from Carnegie Mellon University, Pittsburgh. Uwe has worked at Deutsche Bank, Citibank, UBS, Sal. Oppenheim jr. & Cie and Commerzbank as Trading Floor Quant and Structurer. In 1999 he founded MathFinance, a global network of Financial Engineers providing consulting Front Office Financial Modeling. He is editor of the Annals of Finance, the webpage www.mathfinance.com and the MathFinance Newsletter. He published two books on Foreign Exchange, many articles in journals, and participates regularly in international conferences discussing Derivatives, Foreign Exchange and Financial Engineering. In October 2003 he joined the Frankfurt School of Finance & Management as a Professor of Quantitative Finance. Since 2011 he is a Honorary Professor for Quantitative Finance. Prof. Wystup provides executive training on: foreign exchange derivatives, structured products, financial mathematics and numerical methods for derivatives pricing. He was visiting professor at the Department of Mathematical Sciences of Carnegie Mellon University, Pittsburgh, USA in 2009.
Video
To be published here
Slides
To be published here
Resources
- Uwe Wystup's website: http://www.mathfinance2.com/Company/MfFamily
- MathFinance website: http://www.mathfinance.com
Thalesian Seminar (San Francisco) — Dr. Richard Libby — Metamathematical Finance
Date and Time
6:00 p.m. on Wednesday, 19th October, 2011.
Venue
LH Community Meeting Room, located on the San Francisco Public Library's lower level (please enter at 30 grove street and proceed down stairs to the lower level).
Meetup.com
You can register for this free inaugural talk of the Thalesian SF Fall seminar on Meetup.com: http://events.thalesians.com/events/34937802/
This event will be held in conjunction with the GARP San Francisco Chapter meetings. GARP members can alternatively register for this event at http:/www.garp.com
Abstract
Quantitative finance relies on a number of assumptions about the behavior of markets. The degree to which these assumptions approximate the reality may or may not lead to accurate analysis and forecasting. This talk will examine these assumptions in an historical context and with a view as to how to make them better, or at least less dangerous when mis-handled.
Speaker
Richard is the Founding Director of Perihelion Capital Advisors, LLC, a firm devoted to risk advisory and analytics services in San Francisco, California. Prior to founding Perihelion, Richard was the Chief Credit Officer at Barclays Global Investors, where his focus was on counterparty credit and risk capital analysis, market and liquidity risks, and risk management governance. His team of market and credit risk analysts controlled and managed trading exposures and performed risk assessments ensuring that the asset manager was appropriately capitalized. Prior to his work with Barclays, Richard oversaw the development of market and credit risk systems for the measurement and control of derivatives and foreign exchange exposures at Bank of America. He holds a PhD in Mathematics from UC Santa Cruz.
Video
http://www.zentation.com/viewer/index.php?passcode=XF2jkyC3q9
Resources
Thalesian Seminar (London) — Dr. John Crosby — Reflections on trading and hedging complex derivatives: Is the business model broken?
Date and Time
7:30 p.m. on Wednesday, 5th October, 2011.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/34518552/
Abstract
We ask if the business model used by banks to price and hedge complex derivatives is broken. Answering our own question in the affirmative, we propose simple-to-implement fixes which are based on more fundamental economic analysis and on banks holding reserves against market imperfections and model risks.
Speaker
John Crosby gained a first class honours degree in Applied Mathematics and Theoretical Physics at Girton College, Cambridge University before going on to study Electrical Engineering at University College, Oxford University. He began his career by trading fx options. He then moved to Monis (formerly London Business School Financial Software) where he researched and wrote their pricing libraries for a very wide range of exotic options as well as co-writing their three-factor Convertible bond model, which captured stochastic equity prices, interest-rates and default risk. He has then worked at First Chicago, Barclays Capital and Lloyds TSB Financial Markets where he has been responsible for developing advanced models for pricing and risk-managing a wide-range of complex derivatives. John is best known for publishing a number of papers on the subject of pricing commodity derivatives using a multi-factor jump-diffusion model and for being a co-author of the Carr-Crosby fx options model.
John is a visiting Professor of Finance in the Centre for Economic and Financial Studies in the Department of Economics at Glasgow University.
John is also an invited lecturer on the M.Sc. course in Mathematical Finance in the Mathematical Institute at Oxford University (link here).
Outside of mathematical finance and derivatives research, his main interests are sport (he is a keen runner and cyclist and regularly goes to the gym) and history. He is also a reasonably proficient speaker of Russian.
Video
To be published here
Slides
To be published here
Resources
- John Crosby's website: http://john-crosby.co.uk/
Thalesian Seminar (London) — Dr. Lajos Gergely Gyurko — Cubature on Wiener space and Multilevel Monte-Carlo
Date and Time
7:30 p.m. on Wednesday, 14th September, 2011.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/31934452/
Abstract
"Cubature on Wiener space" is a numerical method for the weak approximation of SDEs. After an introduction to this method we present some cases when the method is computationally expensive, and highlight some techniques that improve the tractability. In particular, we adapt the Multilevel Monte-Carlo framework and extend the Milstein-scheme based version of Mike Giles to higher dimensional and higher degree cases.
Speaker
Lajos Gergely Gyurko obtained a DPhil in Mathematics from the Mathematical Institute, University of Oxford. After graduating he joined the institute as a Departmental Lecturer. Beyond lecturing numerical methods, Greg is the course director of the Mathematical and Computational Finance MSc and faculty member of the Oxford-Man Institute of Quantitative Finance. Greg's research interests are Rough Paths Theory and its applications in Computational Finance.
Video
To be published here
Slides
To be published here
Resources
- Lajos Gergely Gyurko's website: http://www.maths.ox.ac.uk/contact/details/gyurko
Thalesian Seminar (New York) — Gregory Zuckerman — Lessons from The Greatest Trade Ever
Date and Time
5:30 p.m. on Tuesday, 23rd August, 2011.
Venue
Enter and leave the building at 188 Madison Avenue. Signs will direct you to the lower level and conference room 014/015.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/28022141/
Abstract
How a band of unlikely investors pulled off the greatest financial coup in history, why the experts didn’t see the global real-estate collapse coming, and why we’re in an era of financial bubbles.
Speaker
Gregory Zuckerman is a Special Writer at The Wall Street Journal and author of "The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History," a New York Times and Wall Street Journal best-seller published by Broadway Business, a division of Random House. He writes about hedge funds, private-equity firms, big financial trades and other investing topics, and he helps pen the widely read "Heard on the Street" column.
Greg was part of a team that won the 2007 Gerald Loeb award -- the highest honor in business journalism -- for breaking news coverage of the collapse of hedge fund Amaranth Advisors, and he was part of a team that won the 2003 Gerald Loeb award for breaking news coverage of the demise of telecom provider WorldCom. Greg also was part of a team that won the New York Press Club Journalism award, and he was nominated for a 2008 Gerald Loeb award, for coverage of the mortgage meltdown.
Greg appears regularly on CNBC, Fox Business and other television networks to discuss hedge funds, stocks and financial trades, and he makes regular appearances on National Public Radio, Bloomberg Radio and radio stations around the globe.
Greg joined the Journal in 1996 after writing about media companies for the New York Post. Previously, he was the managing editor of Mergers & Acquisitions Report, a newsletter published by Investment Dealers' Digest. He graduated from Brandeis University in 1988, Magna Cum Laude. He lives with his wife and two sons in West Orange, N.J., where they enjoy the New York Yankees in the summer, and suffer with the New York Knicks in the winter.
Disclaimer
This is not an instructional program of the New York Public Library.
Video
Slides
To be published here
Resources
- Gregory Zuckerman's website: http://www.gregoryzuckerman.com/
- The Greatest Trade ever page: http://www.gregoryzuckerman.com/about-the-book/
Thalesian Seminar (London) — Saeed Amen — US employment report and its impact on intraday FX markets
Date and Time
7:30 p.m. on Wednesday, 13th July, 2011.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/22636491/
Abstract
We discuss how the US employment report impacts major FX crosses from both a volatility and directional spot perspective on an intraday basis. In particular, we examine the impact of surprises in the employment report on FX spot and how this sensitivity varies across different crosses. We also examine options strategies that can be used over the event.
Speaker
Saeed Amen is a Managing Director at Thalesians Ltd.
Saeed started his career at Lehman Brothers. He worked on the FX desk developing systematic trading models for both G10 and EM and was part of the team who developed the MarQCuS suite of models. He was also responsible for a systematic FX prop trading book and conducted research around high frequency FX including economic events. He currently works at Nomura as a Vice President in Quantitative Strategy, also in FX, developing their model infrastructure. He graduated from Imperial College with a first class honours master's degree in Mathematics and Computer Science.
Video
To be published here
Slides
To be published here
Thalesian Seminar (New York) — Rakesh Joshi — FPGAs for HFT
Date and Time
6:30 p.m. on Wednesday, 29th June, 2011.
Venue
Second floor at O'Lunneys, Theatre District, NYC.
Meetup.com
You can register for this event and pay online on Meetup.com: http://www.meetup.com/thalesians/calendar/17438075/
Abstract
The talk discusses the application of reconfigurable devices in high frequency trading. Opening with an overview of HFT styles; application areas for FPGAs are introduced, followed by an FPGA primer covering:
- structure, organization and components of an FPGA
- device scale – how many functional units (logic blocks, memory)
- combinatorial and sequential logic and the notion of clock constraints
- common approaches to synchronization
- examples of available shrink-wrapped high level function modules (IP cores)
With that background, some key similarities and differences, advantages and disadvantages relative to GPU devices are reviewed; following which we return to specific HFT applications that exploit the capabilities of FPGAs. Various development tools that make FPGA development accessible are surveyed and, time permitting, a specific HFT related example will be reviewed.
Speaker
Rakesh is a founding partner of Eigen.Systems, a tools and consulting company focussed on parallel computing in computational finance. Prior to founding Eigen.Systems in 2006, Rakesh was CTO at Archeus Capital, and Citigroup since 1992 in various roles in fixed income derivatives, FX and emerging markets technology and trading. His current interests are irregular parallel problems and visualization of economic, risk and market data.
Slides
Video
Click below for Flash streaming video.
Resources
Thalesian Seminar and Drinks (London) — Prof. Claudio Albanese — Funding strategies for counterparty credit risk: regulations, models and technology
Date and Time
7:30 p.m. on Wednesday, 15th June, 2011.
Venue
Upstairs at City Pride, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/20992761/
Abstract
Basel III and the Dodd-Frank Act are inducing a shift in counterparty credit risk management and trading practices. To address the multiple challenges, we developed a high performance single node engine for global market simulations and for the modeling of global portfolios of netting sets.
Our engine's performance as a CVA calculator proved to be vastly superior to that of traditional grid farm implementations. Moreover, we found several other more advanced applications which are nearly out of reach of grid computing, including
- Fully calibrated, arbitrage free, dynamic modeling of all credit and market factors under the risk neutral measure;
- Efficient valuation of CVA volatility, as required under the advanced Basel III framework;
- Pricing of margin revolvers, i.e. revolving lines of credit attached to cross-product netting sets for cleared portfolios; and
- Securitization of portfolios of margin revolvers.
In the talk we elaborate on the changing regulatory environment, the software architecture we implemented and the specialist hardware configurations we use and contributed to design.
Speaker
Claudio Albanese is a Visiting Professor at the Financial Mathematics Group at King's College and an independent consultant at Global Valuation Ltd. He received his doctorate in Physics from ETH Zurich, following which he held post-doctoral positions at New York University and Princeton University. He was Associate Professor in the Mathematics Department of the University of Toronto and then Professor of Mathematical Finance at Imperial College London.
Video
Slides
Resources
- Claudio Albanese's home page: http://www.albanese.co.uk/
Thalesian Seminar (New York) — Jim Gatheral — Optimal Order Execution
Date and Time
6:30 p.m. on Tuesday, 14th June, 2011.
Venue
Third floor at the Playwright Tavern, Theatre District, NYC.
Meetup.com
You can register for this event and pay online on Meetup.com: http://www.meetup.com/thalesians/calendar/18472071/
Abstract
In this talk, we review various models of market impact. We use variational calculus to derive optimal execution strategies, and show that in many conventional models, static strategies are dynamically optimal. We then present a model in which the optimal strategy does depend on the stock price and derive an explicit closed-form solution for this strategy by solving the HJB equation. We conclude by exploring the sensitivity of expected cost in this model to the execution strategy. This is joint work with Alexander Schied.
Speaker
Jim Gatheral is professor of mathematics at Baruch College, CUNY teaching mostly courses in the Masters of Financial Engineering (MFE) program. Prior to joining the faculty of Baruch College, Jim was a Managing Director at Bank of America Merrill Lynch, and also an adjunct professor at the Courant Institute of the Mathematical Sciences, New York, where for many years he co-taught popular classes in the Masters Program of Mathematics in Finance. Prior to 2005 he headed the Equity Quantitative Analytics groups at Merrill Lynch. Over his long career in the financial markets, he has been involved at one time or other in all of the major derivative product areas as bookrunner, risk manager and quantitative analyst. Jim has a BSc in mathematics and natural philosophy from Glasgow University and a PhD in theoretical physics from Cambridge University. His current research focus is on volatility modelling and modelling equity market microstructure for algorithmic trading. His best-selling book, The Volatility Surface: A Practitioner's Guide (Wiley 2006) is one of the standard references on the subject of volatility modeling.
Slides
Thalesians_Gatheral_20110614.pdf
Resources
For older events, please see The Thalesians Quantitative Finance Seminars.
Puzzles
Masses and Buckets
You have M masses, 
which you want to distribute across N buckets "as uniformly as possible". By this I mean that you are trying to minimise 
, where bk is the sum of the masses in the k-th bucket. How would you achieve this?
To make this a little bit more concrete, suppose that I give you 20 masses, e.g. 23, 43, 12, 54, 7, 3, 5, 10, 54, 55, 26, 9, 9, 43, 54, 1, 8, 6, 38, 33. There are 4 buckets. How would you distribute the masses?
Please send your answers to paul, who happens to be at thalesians.com.
[ Solution ]
