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The Thalesians
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.
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.
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 both the Thalesians NYC seminars with local organizer Harvey Stein and the Thalesians SF seminars.
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) — Prof. Uwe Wystup — Overview of Product and Model Trends in FX Options
Date and Time
7:30 p.m. on Wednesday, 26th June, 2013.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://www.meetup.com/thalesians/events/125113102/
Abstract
In Foreign Exchange Options markets first generation exotics like barrier and touch options have become vanilla-like commoditized derivatives traded in a liquid market. We review some of the traditional vanna-volga models frequently used by practitioners and software vendors, demonstrate their pros and cons, determine consistency and design requirements as well as limitations.
We show how recent trends try to overcome the inconsistencies with stochastic-local volatility hybrid models (SLV). We provide an overview of such models used in the market and show by case studies how they relate to vanna-volga based approaches.
And by the way, are target forward structures still allowed?
Speaker
Uwe Wystup is managing director of www.mathfinance.com, a global network of quants specializing in modeling and implementing and validating derivatives models. He has been working as Financial Engineer, Structurer and Consultant in FX Options Trading Teams of Citibank, UBS, Sal. Oppenheim and Commerzbank since 1992 and became an internationally known FX Options expert in both Academia and Practice.
Uwe holds a PhD in mathematical finance from Carnegie Mellon University, serves as an honorary professor of Quantitative Finance at Frankfurt School of Finance & Management and associate fellow at Warwick Business School.
His first book Foreign Exchange Risk co-edited with Jürgen Hakala published in 2002, has become a market standard. His second book on FX Options and Structured Products appeared in 2006 as part of the Willey Finance Series. He has also published articles in Finance and Stochastics, the Journal of Derivatives, Review of Derivatives Research, Quantitative Finance, the Annals of Finance, Wilmott Magazine, Derivatives Week.
Video
To be published here
Slides
To be published here
Resources
- Uwe Wystup's website: https://mathfinance2.com/Papers#Wystup
IAFE-Thalesians Seminar (New York) — Emilian Belev — A Structural Model of Sovereign Credit and Bank Risk
Agenda
June 19th, 2013:
5:45 PM Registration
6:00 PM Seminar Begins
7:30 PM Reception
Venue
NYU Kimmel Center, Room 914, Kimmel Center, 60 Washington Square South, NY 10012, NY
Registration
You can register for this event on Meetup here.
Registration fees are complimentary for IAFE members. Go to the IAFE-Thalesians site for further details.
Abstract
In the recent past, sovereign credit took center stage in the market's perception of risk. This occurred not only because certain countries emerged as potential debtors in default, but also because some major economies showed signs of fundamental strain in their public finances. The financial market effects of potential sovereign default and ensuing bank weakness and contagion, and the undermined capability of governments to sustain the Keynesian support for their vulnerable economies demonstrate the paramount importance of accurate and rigorous risk measurement of sovereign entities and financial institutions.
In this presentation we make an overview of a model designed for this task. It builds on established credit risk methodology for corporate entities known from the seminal work of Merton, and takes a new direction to adapt the default option argument to a sovereign debt setting. The proposed model caters to economic intuition and resorts to explicit measures of macro economic activity as its buildings blocks. We differentiate sovereign entities into three distinct categories, and adapt our general arguments to each of these groups. Furthermore, we pursue the connection between the viability of sovereign entities and the viability of the jurisdictional financial institution. Finally, we juxtapose the model results with metrics of credit risk from the financial markets, as a reality check of the success of approach.
Speaker
Emilian heads the development of Northfield's Enterprise Risk analytics for the last 12 years. His domain of responsibilities include modeling equity and fixed income, currency, equity, interest rate, and credit derivatives, structured products, directly owned real estate, private equity, and infrastructure, and developing an integrated framework for these asset classes to be analyzed side-by-side in a coherent, accurate, and economically logical fashion. He has introduced various innovative methodologies in the areas of convertible bonds modeling, MBS path dependency, efficiency of numerical derivative pricing algorithms, credit risk among tranches of seniority, infrastructure investments, and directly owned real estate. Emilian has presented on some of these topics at various industry events in North America and Europe. Prior to joining Northfield, Emilian has been with State Street Global Advisors. Emilian is an actively involved CFA charter holder, holder of the Certificate in Advanced Risk and Portfolio Management, a member and founding member of respectively QWAFAFEW Boston and QWAFAFEW Toronto, a member of the PRMIA expert advisory group for Market Risk, and a winner of the 2013 PRMIA award for New Frontiers in Risk Management.
IAFE-Thalesians Seminars
The IAFE-Thalesians Seminar Series is a joint effort on the part of the 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 IAFE and Thalesians members only.
Recent Events
Thalesian Seminar (London) — Dr. Lajos Gergely Gyurko — Modelling and measuring slippage using the signature of order book data
Date and Time
7:30 p.m. on Wednesday, 12th June, 2013.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://www.meetup.com/thalesians/events/121482242/
Abstract
We aim to explore how multiple features observed in real market data can be characterised quantitatively via a property of sample paths known as the signature of the path.
At an abstract mathematical level, the notion of a signature as an informative transform of a multidimensional time series was established by Ben Hambly and Terry Lyons [1], meanwhile Ni Hao et al [2] have introduced the possibility of its use to understand financial data and pointed to the power this approach has for machine learning and prediction.
We evaluate and refine these theoretical suggestions against some real world data and practical examples. Moreover, the paper identifies a low dimensional part of the signature that preserves essential information for understanding and measuring various market features in order to improve the efficient choice of trade execution algorithms.
References:
[1] Ben Hambly, Terry Lyons, "Uniqueness for the signature of a path of bounded variation and the reduced path group", Annals of Mathematics, Pages 109-167 from Volume 171 (2010), Issue 1
[2] Ni Hao, Daniel Levin and Terry Lyons - "Learning from the past, predicting the statistics for the future, learning an evolving system", preprint, 2012
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 Dinner Event (San Francisco) — Jesse Davis — Risk Model Imposed Manager-to-Manager Correlation
Date
Wednesday, June the 5th, 2013
Agenda
4:15-4:30: Registration
4:30-5:30: Talk
5:45-7:30: Thalesian Dinner with the speaker
Venue
Rm 527, 101 Howard Street, University of San Francisco
Meetup.com
You can register for the dinner event on Meetup.com: http://events.thalesians.com/events/114818282/
Abstract
Do risk models create correlations between investment managers? There is a great deal of concern among investment managers and their investors regarding the correlation between different investment manager's strategies. The concern arises due to investor's needs to create a diversified portfolio of strategies as well as additional stability issues that come with "crowded trades". The focus of these concerns is invariably on the alpha signals developed by different managers with no worry spent on the other pieces of the investment process, however. Correspondingly, the majority of research time spent by investment managers is in the alpha signal generation process with risk modeling and portfolio construction often left to either off-the-shelf techniques or even outsourced to third-party providers. This talk demonstrates that the usage of common risk models itself creates correlation between manager's portfolios, identifies the reason for this correlation and its limiting case, offers an intuitive mathematical interpretation of the problem, and analyzes the results of employing some proposed solutions.
Speaker
Jesse Davis is a Director in the Global Macro Research group at First Quadrant, a $17B systematic institutional investment manager. His primary responsibility there is in leading and performing alpha research for First Quadrant's global macro portfolios, and he previously also served as Director of the Risk Office overseeing risk across all First Quadrant products. He has previously been an alpha researcher in a US equity market neutral hedge fund as well as founder of a software company dedicated to delivering quantitative tools to discretionary investors. Mr. Davis earned Math, Electrical Engineering, and Computer Science degrees from MIT in 2002 and became a CFA Charterholder in 2010.
Thalesian Seminar (London) — Patrick S. Hagan — Arbitrage Free SABR
Date and Time
7:30 p.m. on Wednesday, 22nd May, 2013.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://www.meetup.com/thalesians/events/119389682/
Abstract
Smile risk is often managed using the explicit implied volatility formulas developed for the SABR model. These asymptotic formulas are not exact, and this can lead to arbitrage for low strike options. Here we provide an alternative method for pricing options under the SABR model: We use asymptotic techniques to reduce the SABR model from two dimensions to one dimension. This leads to an effective one dimensional forward equaltion for the probability density which has the same asymptotic order of accuracy as the explicit implied volatility formulas. We obtain arbitrage free option prices by numerically solving this PDE. The implied volatilities obtained from the numerical solutions closely match the explicit implied volatility curves, apart from a boundary layer at very low rates. For very low rate environments, or for very low strikes, the implied absolute (normal) volatility dips downwards, closely matching market observations. We also show how negative rates can be accommodated by replacing the Fβ factor with (F + a)β.
Speaker
Patrick Hagan has made several fundamental contributions to mathematical finance, particularly in the area of interest rate derivatives modelling, where he pioneered the SABR volatility model - now the de-facto approach for including stochastic volatility within the LIBOR market model. Patrick Hagan received his Ph.D and B.S in Applied Mathematics from Caltech. Over the years he has worked at Bloomberg and several banks designing trading systems for fixed income, credit, and foreign exchange derivatives, as well as developing the component models, calibration methods, and numerical algorithms. He served at Head of Quantitative Analytics and Chief Investment Officer at JP Morgan. Before entering finance he was Deputy Director of the CNLS and a member of the Computer Research and Applications group at Los Alamos National Laboratory. He has also worked at Exxon Science Laboratories, and has taught at Caltech, Stanford, the Institute for Mathematics and its Applications, and NYU.
Video
To be published here
Slides
To be published here
Resources
- N/A
IAFE-Thalesians Seminar (New York) — Prof. Philip Protter — Can one detect a bubble in real time?
Agenda
May 15th, 2013:
5:45 PM Registration
6:00 PM Seminar Begins
7:30 PM Reception
Venue
NYU Kimmel Center, Room 914, Kimmel Center, 60 Washington Square South, NY 10012, NY
Registration
You can register for this event on Meetup here.
Registration fees are complimentary for IAFE members. Go to the IAFE-Thalesians site for further details.
Abstract
Recent advances in the mathematical modeling of financial bubbles has led to the observation that bubble detection often boils down to determining if, under the risk neutral measure, a process is a strict local martingale or a true martingale. Bubbles are fairly easily recognizable after the fact, once they have run their course, but it is often difficult to detect their presence in real time. There are few tools available to distinguish a martingale from a strict local martingale, and it seems that determining which is the case from data is a delicate procedure. Indeed, one can argue that in principle it is impossible. Nevertheless in this talk we will explain how, in a special case, there is hope that one can determine when a bubble is present, and when it is not, in real time. The talk is based on joint work with Robert Jarrow and Younes Kchia.
Speaker
Philip Protter works in probability theory, with specialties in stochastic calculus, weak convergence and limit theorems, stochastic differential equations and Markov processes, stochastic numerics, and mathematical finance. He is the author of one book and the co-author of three more, and he has published more than 100 research papers. He was a visiting member of the Institute for Advanced Study in 1978, a National Science Foundation/Centre National de la Recherche Scientifique (NSF/CNRS) Exchange Scientist (to France) in 1980, and a Fulbright - Tocqueville Distinguished Chaired Professor in Paris in 2007. He gave the inaugural R. Von Mises Lecture at Humboldt Universität, Berlin, in 2007 and the Bullitt Lecture at the University of Louisville in 2009. This Spring he will give the Karl Menger Lecture at IIT in Chicago. He is a Fellow of the Institute of Mathematical Studies (IMS). Currently he is a Professor of Statistics at Columbia University. Before Columbia, he held positions at Cornell University, Purdue University, and Duke University.
IAFE-Thalesians Seminars
The IAFE-Thalesians Seminar Series is a joint effort on the part of the 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 IAFE and Thalesians members only.
Thalesian Seminar (London) — Claudio Albanese — The FVA-DVA puzzle: Completing Markets with Collateral Trading Strategies
Date and Time
7:30 p.m. on Wednesday, 8th May, 2013.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com:
Abstract
In the aftermath of the crisis, valuations of fixed income derivatives have significantly diverged from the principles of arbitrage-free pricing. Discrepancies arise because of the incompleteness of collateral trading markets which lack of reverse REPO contracts for cash upgrades accepting OTC derivatives as general collateral. This circumstance forces banks to implement sub-optimal super-replication strategies generating wealth transfers across the bank capital structure from shareholders to senior debt holders. The present value of the wealth transfer is the FVA.
To avoid losses to shareholders, the bank cannot realistically carry out a Modigliani-Miller arbitrage which would involve buying back all its debt liabilities using equity capital or shorting its own credit. Transferring FVA costs to clients is a suboptimal solution which engenders systemic arbitrage opportunities and drives the financial system away from Pareto optimality.
In this talk, we discuss market-completing collateral trading strategies which solve the problem at the root. They reduce or eliminate the FVA and DVA. They also exploit the form of bank capital structure arbitrage revealed in current derivative valuations. Similar strategies also mitigate counterparty credit risk for banks and reduce or eliminate CVA capital charges.
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
To be published here
Slides
To be published here
Resources
- N/A
IAFE-Thalesians Seminar (New York) — Prof. Paul Glasserman — How Likely is Contagion in Financial Networks?
Agenda
April 23rd, 2013:
5:45 PM Registration
6:00 PM Seminar Begins
7:30 PM Reception
Venue
NYU Kimmel Center, Room 914, Kimmel Center, 60 Washington Square South, NY 10012, NY
Registration
You can register for this event on Meetup here.
Registration fees are complimentary for IAFE members. Go to the IAFE-Thalesians site for further details.
Abstract
Interconnections among financial institutions create potential channels for contagion and amplification of shocks to the financial system. We estimate the extent to which interconnections increase expected losses, under a wide range of shock distributions. An essential and novel feature of our analysis is that it assumes only minimal information about network topology. This is important because financial networks are opaque. We find that expected losses from network effects are surprisingly small without substantial heterogeneity in bank sizes and a high degree of reliance on interbank funding. They are also small unless shocks are magnified by some mechanism beyond simple spillover effects; these include bankruptcy costs, fire sales, and mark-to-market revaluations of assets. We illustrate the results with data on the European banking system. This is joint work with Peyton Young of Oxford.
Speaker
Paul Glasserman is the Jack. R Anderson Professor of Business at Columbia Business School, where he serves as research director of the Program for Financial Studies. His research focuses on risk management, derivative securities, and portfolio selection. In 2011-2012, he was on leave from Columbia and working with the Office of Financial Research in Washington, which led to the research presented in this talk. He has previously held visiting positions at Princeton University, NYU, and the Federal Reserve Bank of New York, and he worked at Bell Labs before joining Columbia in 1991. He earned an A.B. from Princeton in 1984 and Ph.D. from Harvard in 1988.
IAFE-Thalesians Seminars
The IAFE-Thalesians Seminar Series is a joint effort on the part of the 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 IAFE and Thalesians members only.
Thalesian Seminar (London) — Daniel Kuhn — Scenario-Free Stochastic Programming: Methodology and Applications
Date and Time
7:30 p.m. on Wednesday, 24th April, 2013.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/114762492/
Abstract
Traditional optimization models only involve deterministic parameters whose values are assumed to be known precisely. However, many practical decision problems involve uncertain parameters such as future prices and resource availabilities. It has been shown that treating these parameters as deterministic quantities can lead to severely suboptimal or even infeasible decisions. Stochastic programming overcomes this deficiency by faithfully treating the uncertain parameters as random variables. Stochastic programs are usually solved by approximating the random variables with a finite number of scenarios. Such scenario-based approaches suffer from a curse of dimensionality, that is, the optimization models scale exponentially with the number of uncertain parameters. In this talk, we present a scenario-free approximation to stochastic programming. Instead of discretizing the random variables, we employ a low-dimensional representation of the problem's decision variables. The optimization model scales polynomially with the number of uncertain parameters and is computationally tractable. We illustrate how this technique can be used to solve large-scale problems in operations management and energy economics.
Speaker
Daniel Kuhn is a Senior Lecturer in the Department of Computing at Imperial College London. His current research interests are focused on the development of efficient computational methods for the solution of stochastic and robust optimization problems and the design of approximation schemes which ensure their computational tractability. This theoretical work is primarily application-driven, the main application areas being energy systems, finance and engineering.
Video
To be published here
Slides
To be published here
Resources
- N/A
Thalesian Seminar (London) — Gary Wong — Addressing emerging collateral issues and CVA Trading issues through counterparty party credit risk transfer: a more in-depth look at securitization schemes and Margin Lending
Date and Time
7:30 p.m. on Wednesday, 10th April, 2013.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/111518332/
Abstract
While Dodd Frank and Basel III pushes OTC derivatives market towards full collateralization and central clearing, there are many structural reasons where a significant number of counterparty are still rooted in unsecured trades, incurring CVA, FVA and regulatory capital charges. A host of problematic business and operational issues are emerging, including swap pricing (CVA + FVA charge), extending credit line for new business counterparties, CSA and collateral requirements, calculating collateral funding costs and their allocation, CVA risk and hedging, and finally capital ratio and RoC. A number of banks tried different securitization schemes to transfer these counterparty credit risk to outside investors, to very limited success. I will explore some promising variation on these securitization schemes, which can be viewed as intermediate step leading towards Margin Lending. Margin lending is a new construct or new financial intermediary function, which lend collateral to portfolio of unsecured counterparties, transforming unsecured trades to fully collateralised trades to the banks, thus avoiding all the problematic issues mentioned before. At the heart of margin lending is a securitization process, which is based on new technology, providing transparent quantitative credit and market risk analysis for all the market participants. Although a number of investors already express interests in participating in the scheme, there are a number of conceptual and practical issues raised. I will examine these issues and suggest practical implementation strategy to address them.
Speaker
Dr. Gary Wong is the CEO of Ipotecs, providing advisory service focusing on collateralization of derivatives trades with unsecured counterparty through margin/collateral lending operation. The process reduces banks’ counterparty risk exposure and capital requirements, and lowers the cost of OTC derivatives business for both banks and counterparty, and creates investment opportunity for a whole spectrum of investors through securitization of counterparty credit risk.
Prior to starting Ipotecs, he spent many years trading complex structured derivatives and developing risk management techniques and infrastructure to control risks. His latest role was Managing Director and Business Head of Structured Trading Group in Mitsubishi UFJ Securities International (MUSI), responsible for the P&L and business development of all structured derivatives.
His responsibilities included trading and structuring desk, risk management desk, quantitative modelling team and technology infrastructure team; he also has close working relationships with risk and operational groups, ranging from Model Validation, Risk Control, Product Control to Operations. He and his groups developed sophisticated models and high-end technology as a platform for financial trading and risk reporting, and for many years was the most profitable group in MUSI.
Prior to this, he was a swap trader, and developed the exotic derivatives trading capability in Mizuho International. Before that, he was in JP Morgan Asset Management, working on asset allocation models, and IT infrastructure including real-time derivatives and options pricing system.
He has both BSc (1st class) and PhD in Physics from Imperial College, London University.
Video
To be published here
Slides
To be published here
Resources
- N/A
Thalesian Seminar (London) — Iain Clark — Commodity Option Pricing: Energy Derivatives — Oil, Gas and Coal
Date and Time
7:30 p.m. on Wednesday, 27th March, 2013.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/110138722/
Abstract
Commodities as an asset class have experienced somewhat of a surge in interest over the past ten years, driven largely by an increase in demand from newly industrialising countries, but also by investor appetite for investment opportunities that are weakly correlated with more liquid financial markets. Commodities can be very broadly categorised into three major areas - metals, energy and agricultural. In this talk, I shall introduce the typical financial instruments encountered by energy quants (quantitative analysts), such as futures, options on futures, swaps and Asians. It will be seen that market quotes exist which can be used to calibrate implied volatility surfaces, which are used for option pricing.
Examples will be given to show how futures curves and volatility surfaces typically evolve, using the benchmark WTI crude oil as an example (we discuss natural gas and gasoline also).
While I shall discuss some aspects of pricing and theory, the talk will be primarily descriptive and will be accessible to anyone with an interest in resource markets. The talk is the first in a small series of sneak previews of the material in my new book Commodity Option Pricing: A Practitioner's Guide, due to appear in print with Wiley Finance later in 2013.
Speaker
Iain Clark has over 13 years experience as a front office quant. He has worked as Head of FX Quantitative Analysis at Unicredit, 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
Resources
- N/A
Thalesian Seminar (London) — Attila Vrabecz — Financial data mining with kdb+/q
Date and Time
7:30 p.m. on Wednesday, 13th March, 2013.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/107619162/
Abstract
This talk is going to showcase kdb+'s data mining and analytical capabalities on large scale financial data.
Speaker
Attila Vrabecz has been working with kdb+ over seven years and is a leading figure in the kdb community. He has been working at multiple different sized firms on both the buy and sell side.
Video
To be published here
Slides
To be published here
Resources
- N/A
IAFE-Thalesians Seminar (New York) — Dr. Marcos López de Prado — Concealing the trading footprint by determining the Optimal Execution Horizon (OEH)
Agenda
March 20th, 2013:
5:45 PM Registration
6:00 PM Seminar Begins
7:30 PM Reception
Venue
NYU Kimmel Center, Room 914, Kimmel Center, 60 Washington Square South, NY 10012, NY
Registration
You can register for this event on Meetup here.
Registration fees are complimentary for IAFE members. Go to the IAFE-Thalesians site for further details.
Abstract
Market Makers adjust their trading range to avoid being adversely selected by Informed Traders. Informed Traders reveal their future trading intentions when they alter the Order Flow. Consequently, Market Makers’ trading range is a function of the Order Flow imbalance. The Optimal Execution Horizon (OEH) algorithm takes into account order imbalance to determine the optimal participation rate, i.e. how much volume a trader needs to conceal his trading intentions. Paper: http://ssrn.com/abstract=2038387.
Speaker
Marcos López de Prado is the Head of Quantitative Trading & Research at Hess Energy Trading Company, the trading arm of Hess Corporation, a Fortune 100 company. Before that, Marcos was Head of Global Quantitative Research at Tudor Investment Corporation, where he also led High Frequency Futures Trading and several strategic initiatives. Marcos joined Tudor from PEAK6 Investments, where he was a Partner and ran the Statistical Arbitrage group at the Futures division. Prior to that, he was Head of Quantitative Equity Research at UBS Wealth Management, and a Portfolio Manager at Citadel Investment Group.
In addition to his 15+ years of investment management experience, Marcos has received several academic appointments, including Postdoctoral Research Fellow of RCC at Harvard University, Visiting Scholar at Cornell University, and Research Affiliate at Lawrence Berkeley National Laboratory (U.S. Department of Energy’s Office of Science). He holds a Ph.D. in Financial Economics (Summa cum Laude, 2003), a Sc.D. in Mathematical Finance (Summa cum Laude, 2011) from Complutense University, is a recipient of the National Award for Excellence in Academic Performance by the Government of Spain (National Valedictorian, Economics, 1998), and was admitted into American Mensa with a perfect score. Marcos is a scientific advisor to Enthought's Python projects (NumPy, SciPy), and a member of the editorial board of the Journal of Investment Strategies (Risk Journals). His research has resulted in three international patent applications, several papers listed among the most read in Finance (SSRN), publications in the Review of Financial Studies, Mathematical Finance, Journal of Risk, Journal of Portfolio Management, etc. His current Erdös number is 3, with a valence of 2.
IAFE-Thalesians Seminars
The IAFE-Thalesians Seminar Series is a joint effort on the part of the 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 IAFE and Thalesians members only.
MathFinance Conference Frankfurt (External Events)
Date and Time
Monday, 18th March, 2013 - Tuesday, 19th March, 2013 (MathFinance Conference)
Venue
Frankfurt School of Finance and Management
Register
https://mathfinance2.com/Conferences/2013/Home (MathFinance Conference - more details about speakers) - 20% discount available for Thalesians members
Abstract
The MathFinance Conference is the largest quantitative finance event covering the European market and one of the top quant events of the year. Renowned speakers from all over the world deliver their talks as part of this two-day event, held in Frankfurt.
Speakers include Dr. Jesper Andreasen, Danske Markets, Dr. Hans Bühler, JP Morgan, Alexander Giese, UniCredit, Dr. Jürgen Hakala, EFG Financial Services, Dr. Christopher Jordinson, UBS, Prof. Marcus R.W. Martin, Darmstadt University of Applied Sciences / CCSOR, Prof. Dr. Uwe Naumann, Aachen University, Louis-Thomas Nessi, Murex, Andrea Pallavicini, Banca IMI, Prof. Rolf Poulsen, Copenhagen University, Adil Reghai, Natixis, Dr. Gero Schindlmayr, RWE, Dr. Philipp Schröder, d-fine, Prof. Jan Vecer, Frankfurt School of Finance and Management, Prof. Dr. Ralf Werner, DEVnet.
Organiser
Uwe Wystup is managing director of www.mathfinance.com, a global network of quants specializing in modeling and implementing and validating derivatives models. He has been working as Financial Engineer, Structurer and Consultant in FX Options Trading Teams of Citibank, UBS, Sal. Oppenheim and Commerzbank since 1992 and became an internationally known FX Options expert in both Academia and Practice.
Uwe holds a PhD in mathematical finance from Carnegie Mellon University, serves as an honorary professor of Quantitative Finance at Frankfurt School of Finance & Management and associate fellow at Warwick Business School.
His first book Foreign Exchange Risk co-edited with Jürgen Hakala published in 2002, has become a market standard. His second book on FX Options and Structured Products appeared in 2006 as part of the Willey Finance Series. He has also published articles in Finance and Stochastics, the Journal of Derivatives, Review of Derivatives Research, Quantitative Finance, the Annals of Finance, Wilmott Magazine, Derivatives Week.
Thalesian Seminar (London) — Saeed Amen — FX trading using market positioning in FX
Date and Time
7:30 p.m. on Wednesday, 27th February, 2013.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/105370522/
Abstract
In this talk, we introduce the concept of market positioning within FX. Understanding market positioning is a very important part of trading. It is often something that market participants talk about, but less often do investors analyse it in a more quantitative manner which is our aim. We discuss ways of determining market positioning within FX. We examine the relationship between positioning and price action. Furthermore, we look at methods of assessing speculators P&L, and see what impact it has on price action within FX.
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 an Executive Director in Quantitative Strategy, also in FX, developing their model infrastructure and helping run systematic FX prop risk. 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
Resources
- N/A
IAFE-Thalesians Seminar (New York) — Dr. Alexander Eydeland — Models in Commodity Markets
Agenda
February 12th, 2013:
5:45 PM Registration
6:00 PM Seminar Begins
7:30 PM Reception
Venue
NYU Kimmel Center, Room 802, 60 Washington Square South, NY 10012, NY
Registration
You can register for this event on Meetup here.
Registration fees are complimentary for IAFE members. Go to the IAFE-Thalesians site for further details.
Abstract
In this presentation we will focus on unique properties of commodity markets and prices, and describe approaches to modeling physical assets such as storage and power plants.
Speaker
Dr. Alexander Eydeland is Managing Director at Morgan Stanley in charge of global commodities strategies. His previous positions include Head of Research at Mirant Corp., vice president with Lehman Brothers and Fuji Capital Markets, and associate professor of mathematics at the University of Massachusetts. Eydeland holds a Ph.D. degree in Mathematics from Courant Institute of Mathematical Sciences. His papers on risk management, scientific computing, optimization and mathematical economics have appeared in a number of major publications and he has lectured extensively on these subjects throughout the United States, Europe, and Japan. Eydeland is a co-author (with K. Wolyniec) of the book "Energy and Power Risk Management" published in 2002 by Wiley and Co.
IAFE-Thalesians Seminars
The IAFE-Thalesians Seminar Series is a joint effort on the part of the 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 IAFE and Thalesians members only.
IAFE-Thalesians Seminar (New York) — Prof. Robert Almgren — Option Hedging with Market Impact
Agenda
January 14th, 2013:
5:45 PM Registration
6:00 PM Seminar Begins
7:30 PM Reception
Venue
NYU Kimmel Center, Room 914, 60 Washington Square South, NY 10012, NY
Registration
You can register for this event on Meetup here.
Registration fees are complimentary for IAFE members. Go to the IAFE-Thalesians site for further details.
Abstract
We consider the problem of a trader hedging a large options position. We use a realistic proportional market impact cost model, as is commonly used in optimal execution problems, rather than the bid-ask spread model which has been previously used. We also include overnight risk, which is important for an intraday hedge position. Our solutions solve a "pursuit problem", in which the actual hedge position moves smoothly in the direction of the perfect Black-Scholes hedge. We also obtain an expression for the modified volatility of the underlying caused by the hedge activity: if the hedger is long the option then volatility decreases and conversely if he is short. (Joint work with Michael Li, Princeton University.)
Speaker
Robert Almgren, co-founder of Quantitative Brokers, providing agency algorithmic execution and cost measurement in interest rate markets, and Fellow in the Mathematics in Finance Program at New York University. Until 2008, Dr Almgren was a Managing Director and Head of Quantitative Strategies in the Electronic Trading Services group of Bank of America Securities. From 2000-2005, he was a tenured Associate Professor of Mathematics and Computer Science at the University of Toronto, and Director of its Master of Mathematical Finance program. Before that, he was an Assistant Professor of Mathematics at the University of Chicago and Associate Director of the Program on Financial Mathematics. Dr. Almgren holds a B.S. in Physics and Mathematics from the Massachusetts Institute of Technology, an M.S. in Applied Mathematics from Harvard University and a Ph.D. in Applied and Computational Mathematics from Princeton University. He has an extensive research record in applied mathematics, including papers on optimal trading, transaction cost measurement, and portfolio construction.
IAFE-Thalesians Seminars
The IAFE-Thalesians Seminar Series is a joint effort on the part of the 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 IAFE and Thalesians members only.
Thalesian Seminar & Christmas Dinner 2012 (London) — Saeed Amen — Trading the Impact of Events on FX Implied Volatility
Date and Time
7:30 p.m. on Wednesday, 19th December, 2012.
Venue
Private rooms at Dockmaster's House, Canary Wharf, London, UK.
Meetup.com
You can register for this event and pay online on Meetup.com: http://events.thalesians.com/events/93075232/
Abstract & Dinner
We are delighted to invite all of you to our Annual Christmas Dinner at Dockmaster's House. This is a unique opportunity to meet a wide cross-section of our group, with diverse interests, to network with senior practitioners and academics, to learn something new, while enjoying fine Indian food. We have invited our alumni and the distinguished members of our academic advisory board. We look forward to introducing you to them, unless you have already met them
Saeed will deliver a talk on Trading the Impact of Events on FX Implied Volatility. We'll discuss add-ons in FX implied volatility and ascertain what the values of events are in this context. We also investigate how implied compares to realised volatility when there are large implied add-ons. We look at more generalised day of the week behaviour associated with FX implied volatility. Furthermore, we look at the relationship between moves in broader FX implied volatility and specific FX cross implieds.
Help us say goodbye 2012 and meet the New Year 2013 in style, looking forward to new horizons, new insights, new knowledge, and new challenges.
Looking forward to seeing you all!
Thales of Miletus
P.S. Christmas Buffer Menu:
TANDOORI CARDAMOM CHICKEN TIKKA, POPPADUMS WITH CHUTNEYS AND RAITA, ... GINGER LAMB ROGANJOSH, LEG OF LAMB SLOW COOKED WITH GINGER AND YOGHURT, CUMIN POTATOES WITH MINT, INDIAN COTTAGE CHEESE WITH SPINACH, BLACK URAD LENTILS, STEAMED BASMATI RICE, ASSORTED BREADS.
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 an Executive Director in Quantitative Strategy, also in FX, developing their model infrastructure and helping run systematic FX prop risk. 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
Resources
- N/A
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 ]
