# The Thalesians

Images from Thalesians events from around the world over the past 6 years

The Thalesians are a think tank of dedicated professionals with an interest in quantitative finance, economics, mathematics, physics and computer science, not necessarily in that order.

Blog / See our new Thalesians blog / Book / Buy our new book, Trading Thalesians - What the ancient world can teach us about trading today (Palgrave Macmillan) by the Thalesians co-founder, Saeed Amen & foreword by founder, Paul Bilokon

Founding / The group was founded in Sep 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).

The opening of Level39 in 2013 by Mayor Boris Johnson

The Thalesians are also now a member of Level39 - Europe's largest technology accelerator for finance, retail, cyber-security and future cities technology companies​

## Events / Research / Consulting

Events / The Thalesians were originally based in London, UK. In Jan 2011, the organisation became truly global when Matthew Dixon brought it to the United States where he runs the Thalesians NYC seminars with New York Leader Harvey Stein. Attila Agod is the Budapest Leader for our Thalesians Budapest seminars. We are currently in the process of expanding our seminars to Prague and running more workshops.

Research / In late 2013, we started published ground breaking quant strategy notes. Our effort is lead by Saeed Amen, using nearly a decade of his experience both creating and later trading systematic trading models in FX at major investment banks. Visit Research for more.

Consulting / In 2014, we started offering bespoke quant consulting services in markets, signing up our first client, a major US hedge fund and RavenPack, a major news data vendor. Our services includes the creation of bespoke systematic trading models and other quant analysis of financial markets, such as currency hedging and FX transaction cost analysis (TCA). Visit Consulting for more.

## Our Philosophy

We are named after Thales of Miletus (Θαλῆς ὁ Μιλήσιος), a pre-Socratic Greek philosopher who lived in ca. 624 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.

More of our speakers at Thalesians events over the past 6 years

# Forthcoming Events

### Thalesians Séance (Budapest) — Taylor Spears & Panel — The Sociology of CVA

Taylor Spears

A very special thanks to Attila Agod for organising this talk! Our goal is to create a social convergence point for the quantitative financial professionals in Hungary with quarterly events!

#### Date and Time

7:00 p.m. on Fri 9th October, 2015

7:00 p.m. - Welcome drinks, 8:00 p.m. - Taylor Spears presentation 9:00 p.m. - Discussion panel 12.00 a.m. - Next pub

#### Venue

Palack Borbár, Szent Gellért sqr 3, Budapest

#### Meetup.com

You can register for this event on Meetup.com: http://www.meetup.com/thalesians/events/225264939/

#### Abstract

At the 7th Thalesians Séance Taylor Spears from the Sociology Department of The University Edinburgh will introduce the evolution of Credit Valuation Adjustment (CVA) from a sociologist’s point of view. After Taylor's talk a panel of practitioners will challenge his ideas.

Members of the panel: - Andras Bohak (MSCI, Counterparty credit researcher) - Daniel Homolya (Mol Group, Financial risk management team lead) - Balazs Palosi-Nemeth (ING, Architect) - Gabor Salamon (Morgan Stanley, CVA team lead)

#### Speaker

Dr Taylor Spears is a research fellow in the Sociology of Financial Modelling at the School of Social and Political Science in the University of Edinburgh.

### IAQF-Thalesians Seminar (New York) — Dr. Dan Pirjol — Can one price Eurodollar futures in the Black-Derman-Toy model?

Dan Pirjol

#### Agenda

Wednesday, October 14, 2015:

#### Venue

NYU Kimmel Center, Room 914, Kimmel Center, 60 Washington Square South, NY 10012, NY

#### Abstract

Interest rates models with log-normally distributed rates in continuous time are known to display singular behavior. For example, Eurodollar futures prices are infinite in the Dothan and Black-Karasinski models, as shown in 1998 by Hogan and Weintraub. These singularities are usually assumed to disappear when the models are simulated in discrete time. Using a precise simulation of the BDT model, we demonstrate that this is true only for sufficiently low volatilities. Eurodollar futures prices explode for volatilities above a critical value. The explosion is due to contributions from a region in state space which corresponds to very large interest rates and is truncated off in usual simulation methods such as trees and finite difference methods. In the limit of a very small simulation time step the explosion appears for any volatility, and reproduces the Hogan-Weintraub singularity of the continuous time model.

#### Speaker

Dan Pirjol works in the Model Risk Group at JP Morgan, covering valuation models in commodities. Previously he was with Markit and Merrill Lynch in various roles in modeling and model risk, after doing research in theoretical high energy physics. He is interested in applications of methods from mathematical physics and probability to problems in mathematical finance.

#### IAQF-Thalesians Seminars

The IAQF-Thalesians Seminar Series is a joint effort on the part of the IAQF (formerly IAFE) and the Thalesians. The goal of the series is to provide a forum for the exchange of new ideas and results related to the field of quantitative finance. This goal is accomplished by hosting seminars where leading practitioners and academics present new work, and following the seminars with a reception to facilitate further interaction and discussion. The seminar series is limited to IAQF and Thalesians members only.

### Thalesians Seminar (London) — Robert Carver — Lessons from Systematic Trading

Robert Carver

#### Date and Time

7:30 p.m. on Wednesday, 21 October, 2015

#### Venue

Ginger Room, Marriott Hotel, Canary Wharf, London, UK.

#### Meetup.com

You can register for this event and pay online on Meetup.com: http://www.meetup.com/thalesians/events/224130063/

#### Abstract

It's my belief that successful systematic trading is not about finding some deep hidden source of alpha, but about avoiding stupid mistakes. In this talk I share some of the mistakes I've made, and seen others make, whilst designing and managing systematic trading systems for both a multi billion hedge fund and a retail trading account. This is a wide ranging talk which provocatively questions many commonly held beliefs about the business of managing money systematically.

#### Speaker

Robert Carver is an independent systematic trader, and writer. He trades his own capital with a fully automated system of 40 futures markets, using a proprietary system written in python. Robert is the author of "Systematic Trading", a forthcoming book to be published by Harriman House in October 2015. He regularly blogs on the subject of trading, finance and investment.

Robert, who has bachelors and masters degrees in Economics, began his city career trading exotic derivative products for Barclays Capital. He then worked as a portfolio manager for AHL , one of the worlds largest systematic hedge funds before, during and after the global financial meltdown of 2008. Robert was responsible for the creation of AHL's fundamental cross asset global macro strategy, and then managed the funds multi billion dollar fixed income portfolio. He retired from the industry in 2013.

### Thalesians Seminar (Zurich) — Thomas Schmelzer - Portfolio Optimization, Regression and Conic Programming

Thomas Schmelzer

#### Date and Time

6:15 p.m. on Thurday, 26 November, 2015

#### Venue

Room: PLM - 103/104, Plattenstrasse 14, University of Zurich, Zurich, 8092 Zurich

#### Meetup.com

You can register for this FREE event on Meetup.com: http://www.meetup.com/thalesians/events/225880103/

#### Abstract

This will be a free Zurich event - thanks to Prof. Dr. Markus Leippold, Direktor Master of Advanced Studies UZH in Finance for kindly hosting this event and for Swati Mital for organising. The talk will be at 6.15pm Zurich time. There will also be post-events drinks (location tba).

Using examples from portfolio management and quantitative trading we illustrate the power and flexibility of conic programming. We point to various common mistakes in setting up portfolio models and in solving them algorithmically. Several Python code fragments are given.

#### Selected Bios

Dr. Thomas Schmelzer is Head of Quantitative Research at a Geneva based wealth manager. He has a PhD. in Mathematics from University of Oxford where he was a Rhodes Scholar at Balliol College. In his previous roles he has held key positions in the UK, Liechtenstein and Switzerland including Senior Researcher at Winton Capital Management and a Quantitative Portfolio Manager at Oxford Asset Management.

# Recent Events

### IAQF-Thalesians Seminar (New York) — Dr. Tim Leung — Exchange-Traded Funds and Related Trading Strategies

Tim Leung

#### Agenda

Thursday, June 18, 2015:

#### Venue

NYU Kimmel Center, Room 914, Kimmel Center, 60 Washington Square South, NY 10012, NY

#### Abstract

We discuss a number of static and dynamic portfolios related to exchange-traded funds (ETFs). We first discuss the price dynamics of futures-based ETFs and leveraged ETFs. This leads us to develop futures-based strategies for the objective of leverage replication, and discuss their applications to VIX and commodity (L)ETFs. We also analyzed several trading strategies involving multiple leveraged ETFs, accounting for their leverage ratios, volatility decays, expense ratios, and tracking errors. The performance and risk characteristics of these portfolios are studied both analytically and empirically.

#### Speaker

Tim Leung is an Assistant Professor at Columbia University's IEOR Department. He's also an affiliated faculty member of the Center for Financial Engineering, and Institute for Data Sciences & Engineering. He received a Ph.D. in Operations Research & Financial Engineering (ORFE) from Princeton University, and B.S. in Operations Research & Industrial Engineering (ORIE) at Cornell University.

Professor Leung's research focuses on the valuation of financial derivatives, and associated risk management and trading strategies. In particular, he has written extensively on exchange-traded funds (ETFs). His research has been funded by the National Science Foundation (NSF), and published in journals, such as Mathematical Finance, Finance & Stochastics, Quantitative Finance, and SIAM Journals.

#### IAQF-Thalesians Seminars

The IAQF-Thalesians Seminar Series is a joint effort on the part of the IAQF (formerly IAFE) and the Thalesians. The goal of the series is to provide a forum for the exchange of new ideas and results related to the field of quantitative finance. This goal is accomplished by hosting seminars where leading practitioners and academics present new work, and following the seminars with a reception to facilitate further interaction and discussion. The seminar series is limited to IAQF and Thalesians members only.

### IAQF-Thalesians Seminar (New York) — Dr. Andrew Kalotay — Tax-Efficient Trading of Municipal Bonds

Andrew Kalotay

#### Agenda

Thursday, May 14, 2015:

#### Venue

NYU Kimmel Center, Room 914, Kimmel Center, 60 Washington Square South, NY 10012, NY

#### Abstract

Although tax-loss selling is widely recognized as a potential enhancer of after-tax return, it is usually employed opportunistically, rather than as part of a comprehensive investment strategy. In particular, little attention is paid to determining the optimum time to execute, given transaction costs.

Municipal bonds provide an ideal asset class to appreciate the benefit of active tax management, because the tax-exemption of interest by itself does not guarantee tax-efficient performance. We will present a dynamic approach to maximize after-tax return, which includes structuring of the portfolio and optimizing the timing of trades. The key insight is that the right to make a tax-driven trade is a (tax) option, which is acquired automatically and at no cost with any purchase. The value of this option can be rigorously determined. Selling and reinvesting entails swapping the associated options. Thus the sale decision should factor in the net loss of option value. Our dynamic strategy is expected to improve after-tax return over buy-and-hold by 30-80 basis points annually, depending on the duration of the portfolio and on investor-specific considerations. The approach can be adapted to other asset classes, including common equity.

#### Speaker

Andrew Kalotay is a leading authority on the valuation of bonds and interest rate derivatives. He is a prolific contributor to the literature on topics ranging from advance refunding to tax-neutral valuation and tax management of municipal bond investments. His firm licenses fixed income valuation software and provides debt management advisory services.

Before establishing Andrew Kalotay Associates in 1990, Dr. Kalotay was with Salomon Brothers. Prior to Wall Street, he was at Bell Laboratories and AT&T. On the academic side, he was the founding director of the graduate Financial Engineering program at Polytechnic University (now part of NYU).

Dr. Kalotay holds a B.Sc. and M.Sc. from Queen's University and a Ph.D. from the University of Toronto, all in mathematics. He was inducted into the Fixed Income Analyst Society’s "Hall of Fame" in 1997.

#### IAQF-Thalesians Seminars

The IAQF-Thalesians Seminar Series is a joint effort on the part of the IAQF (formerly IAFE) and the Thalesians. The goal of the series is to provide a forum for the exchange of new ideas and results related to the field of quantitative finance. This goal is accomplished by hosting seminars where leading practitioners and academics present new work, and following the seminars with a reception to facilitate further interaction and discussion. The seminar series is limited to IAQF and Thalesians members only.

For older events, please see The Thalesians Quantitative Finance Seminars.

# Puzzles

## Masses and Buckets

You have M masses, $m_1, m_2, \ldots, m_M$ which you want to distribute across N buckets "as uniformly as possible". By this I mean that you are trying to minimise $\sum_{i=1}^N \sum_{j=i}^N (b_i - b_j)^2$, 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?