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The Thalesians

STOP PRESS!! Read our Thalesians paper on 4pm FX here, which was featured in the Wall Street Journal, Why FX Traders Trade: A Reminder, by Katie Martin (11 March 2014)

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 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 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 both the Thalesians NYC seminars with local organizer Harvey Stein and the Thalesians SF seminars.

Systematic trading publications - In late 2013, we started published ground breaking quant strategy notes. Our effort was 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. The Thalesians were also mentioned in the national press for the first time in the Independent in Sep 2013.

Systematic trading consulting - In Jan 2014, we started offering bespoke consulting services in FX markets, signing up our first client, a major US hedge fund. 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. For more information on our quant strategy consulting services and quant strategy notes, please contact saeed@thalesians.com and visit Quant Strategy.

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.

Forthcoming Events

Thalesian Seminar (London) — Didrik Pinte — Python & Quantitative Finance

Didrik Pinte

Date and Time

7:30 p.m. on Wednesday, 26 March, 2014.

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: TBA

Abstract

In this talk, we'll look at some of the key reasons why the Python programming language is a one of the de-facto solution to build successful quantitative finance tools. From research to production systems, Python offers the flexibility and richness needed to solve the real life problems seen in today's finance world.

Speaker

Didrik Pinte is Managing Director of Enthought Ltd. He has been supporting the financial, geophysics and engineering industry for the past 6 years by building advanced scientific computing solutions (e.g. big data processing, real time visualization, scriptable frameworks). He is an engineer from University Catholic of Louvain, Belgium and holds a Master in Management from the LSM, Belgium. He founded the London Financial Python User Group in 2009.

Video

To be published here

Slides

To be published here

Resources

  • N/A

Thalesian Panel (London) — Chiara Albanese & more — Spring market views panel

Saeed Amen

Date and Time

7:30 p.m. on Monday, 7th April, 2014.

Venue

Teak Room at Marriott Hotel in Canary Wharf (near Canary Wharf and West India Quay DLR)

Meetup.com

You can register for this event and pay online on Meetup.com: http://www.meetup.com/thalesians/events/173050052/

Abstract

2014 is going to be a crucial year in markets with Fed tapering. In our very first Thalesians panel to celebrate the 5 year anniversary of the Thalesians first talk, we shall be discussing market views for the future with a panel of traders & strategists that has nearly 40 years of experience combined in FX markets. The discussion will be moderated by Katie Martin who covers FX markets for the Wall Street Journal and is also a well known personality on Twitter @katie_martin_FX.

Speaker

Moderating - Chiara Albanese, WSJ, FX markets journalist Mark Cudmore, MCFX, trader, former European head of FX hedge fund sales at Commerzbank Barney Singer, Nomura, head of EMFX trading, London Dmitri Petrov, Nomura, EM strategist, London Saeed Amen, Thalesians, co-founder of the Thalesians, strategist & trader

Selected Bios

Mark Cudmore has over a decade of experience of trading predominately FX from a macro perspective on both the buyside and sellside. Having started his banking career as an Emerging Markets FX trader at Lehman Brothers, he resigned from his most recent banking role last year as European Head of Hedge Fund Sales at Commerzbank to trade his own capital under MCFXCapital. With a strong focus still on FX, Mark proactively trades around his longer-term macro fundamental views. Mark graduated from Trinity College Dublin with a first class honours degree in Mathematics and Economics.

Barney Singer in an Executive Director at Nomura and heads the Emerging Markets FX Trading team in London. Barney joined Nomura after Lehman Brothers filed for bankruptcy in 2008. At Lehman, Barney also traded EMFX and was responsible for market-making Asian NDFs and for risk-managing the flow originated via the E-Commerce trading platform for Asia FX. He has held internships at Morgan Stanley and Merrill Lynch. Barney studied Economic History With Economics and graduated with 1st class Honours at the London School of Economics. Before that he was awarded the Connelly-Delouvrier scholarship for the General Course Degree Programme at the LSE via Villanova University, Pennsylvania.

Saeed Amen is a Managing Director and a Co-founder at Thalesians Ltd.

Saeed is currently publishing ground-breaking quant strategy notes at Thalesians Ltd., drawing upon nearly a decade of experience both creating and running systematic trading models successfully with real cash. Independently, he is also a systematic FX trader, running a proprietary trading book trading liquid G10 FX. He is currently also writing a book on trading which is due to be published by Palgrave Macmillan (preliminary title: Trading Thalesians - What the ancient world can teach us about trading today)

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. Later he was at Nomura as an Executive Director in Quantitative Strategy, also in FX, developing their model infrastructure and also running systematic FX prop risk. He graduated from Imperial College with a first class honours master's degree in Mathematics and Computer Science.

IAQF-Thalesians Seminar (New York) — Prof. Ciamac Moallemi — High-Frequency Trading and Modern Market Microstructure

Ciamac Moallemi

Agenda

March 20th, 2014:

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 IAQF members. Go to the IAQF-Thalesians Events site for further details.

Abstract

Driven by technological advances, modern financial markets have become an electronic world dominated by automated agents that interact algorithmically. Markets are now characterized by decision-making that evolves on a microsecond timescale, with activity fragmented across many exchanges and alternative market structures. This has led to challenging new decision problems for market participants. This talks explores some of the basic questions and develops quantitative models to address issues that have arisen in modern market microstructure.


Speaker

Ciamac C. Moallemi is the Barbara and Meyer Feldberg Associate Professor in the Decision, Risk, and Operations Division of the Graduate School of Business at Columbia University, where he has been since 2007. He received S.B. degrees in Electrical Engineering & Computer Science and in Mathematics from the Massachusetts Institute of Technology (1996). He studied at the University of Cambridge, where he earned a Certificate of Advanced Study in Mathematics, with distinction (1997). He received a Ph.D. in Electrical Engineering from Stanford University (2007). Prior to his doctoral studies, he developed quantitative methods in a number of entrepreneurial ventures: as a partner in a $200 million fixed-income arbitrage hedge fund, as the director of scientific computing at an early-stage drug discovery start-up, and as the founder of a computer security software start-up. He is an associate editor at the journals Operations Research and Management Science. He is a member of INFORMS, the AFA, and the IEEE. He is the recipient of a British Marshall Scholarship (1996) and a Benchmark Stanford Graduate Fellowship (2003). His research interests are in the area of the optimization and control of large-scale stochastic systems and decision-making under uncertainty, with an emphasis on applications in financial engineering.

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. Allan Malz — Risk-Neutral Systemic Risk Indicators

Allan Malz

Agenda

April 28th, 2014:

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 IAQF members. Go to the IAQF-Thalesians Events site for further details.

Abstract

This talk describes a set of indicators of systemic risk computed from current market prices of equity and equity index options. It displays results from a prototype version, computed daily from January 2006 to January 2013. The indicators represent a systemic risk event as the realization of an extreme loss on a portfolio of large- intermediary equities. The technique for computing them combines risk-neutral return distributions with implied return correlations drawn from option prices, tying together the single-firm return distributions via a copula to simulate the joint distribution and thus the financial-sector portfolio return distribution. The indicators can be computed daily using only current market prices; no historical data are involved. They are therefore forward-looking and can exploit all the information impounded in current prices. However, the indicators blend both market expectations and the market’s desire to protect itself against volatility and tail risk, so they cannot be readily decomposed into these two elements. The talk presents evidence that the indicators have some predictive power for systemic risk events and that they can serve as a meaningful market-adjusted point of comparison for fundamentals-based systemic risk indicators.


Speaker

Allan M. Malz is Senior Analytical Advisor in the Markets Group at the Federal Reserve Bank of New York, where he has worked on implementation of the Fed's emergency liquidity programs to address the financial crisis. He is the author of Financial Risk Management: Models, History, and Institutions (Wiley, 2011), a survey of quantitative risk management tools and of the public policy issues raised by the financial crisis. Before rejoining the Fed, he was chief risk officer at several multi-strategy hedge fund management firms. Previously, Malz was head of research at RiskMetrics Group, which he joined on its spinoff from J.P. Morgan. Malz spent his earlier career at the New York Fed as a researcher and foreign exchange trader. His research, which includes forecasting financial crises, risk measurement for options, and estimation of risk-neutral probability distributions, has been published in a number of industry and academic journals. Malz holds a Ph.D. in Economics from Columbia University, where he also teaches a graduate course on risk management.

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. Peter Carr — Variable Volatility and Financial Failure

PeterCarr

Agenda

May 20th, 2014:

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 IAQF members. Go to the IAQF-Thalesians Events site for further details.

Abstract

Structural models of corporate default (eg. Merton's model) typically impose a rigid para- metric specification on the volatility of the firm's assets. This approach fails to recognize that management can exert some limited control on the level of the assets' risk at every possible level of their firm's default probability. In this talk, we assume that management chooses the assets' volatility level as a non-parametric function of the firms' risk-neutral default prob- ability (RNDP). We develop closed form formulas which relate RNDP and equity value to this asset volatility function and to asset price. We also show how to explicitly determine the implied RNDP and the implied asset value from the market price of the equity and from the market prices of co-terminal calls written on the equity. Remarkably, the RNDP formula is independent of both the initial asset level and the debt level.


Speaker

Peter Carr is a Managing Director at Morgan Stanley with over 18 years of experience in the derivatives industry. He was also a finance professor for 8 years at Cornell University, after obtaining his PhD from UCLA in 1989. He is presently the Executive Director of the Math Finance program at NYU’s Courant Institute, the Treasurer of the Bachelier Finance Society, and a trustee for the Museum of Mathematics in New York. He has over 80 publications in academic and industry-oriented journals and serves as an associate editor for 8 journals related to mathematical finance. He was selected as Quant of the Year by Risk Magazine in 2003 and as Financial Engineer of the Year by IAFE/Sungard in 2010. More recently, Institutional Investor has included Dr. Carr in its annual Tech 50 for the last 3 years.

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.

MathFinance 2014 (Frankfurt - External Event) — Speakers including Wystup & Clark — Quant event

Uwe Wystup

Date and Time

14th - 15th April, 2014.

Venue

German National Library, Frankfurt

To sign up

You can register for this event and pay online at the Global Derivatives Europe website: https://mathfinance2.com/Conferences/2014/Registration

Abstract

The MathFinance Conference is the largest quantitative finance event covering the European market. Its unique take on the blending of industry and academia has allowed it to firmly establish itself as 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 on the 14th and 15th of April 2014.

For over 12 years, the conference has been an influential driver in the dissemination of ideas, information and knowledge. Talks are presented by experts in their field, including distinguished Senior Quantitative Analysts, Traders, Risk Managers and only the top Academics. This ensures that all major developments and issues of this ever evolving marketplace are covered in depth.

Speaker

Many speakers who have also spoken at the Thalesians will be speaking, including Iain Clark (on the Thalesians Advisory Board) and Uwe Wystup.

Global Derivatives Europe (Amsterdam - External Event) — Speakers including Derman & Hull — Trading and risk management

Saeed Amen

Date and Time

12th - 16th May, 2014.

Venue

Hotel Okura, Amsterdam, The Netherlands.

To sign up

You can register for this event and pay online at the Global Derivatives Europe website: http://www.icbi-derivatives.com/FK2383THEM

Members of the Thalesians also have a special 10% discount (please contact saeed who happens to be at thalesians.com for details - clicking the link above will also activate this discount)

Abstract

The World's Leading Quantitative Finance Conference: Cutting Edge Strategies & Practical Techniques For Advanced Derivatives Pricing, Hedging, Trading & Risk Management

What's On The Cards For Global Derivatives 2014?

  • BREAKING NEWS! Brand New Keynote Speaker Confirmed For 2014 - Darrell Duffie of STANFORD UNIVERSITY
  • BREAKING NEWS - Call For Papers! Registered attendees have the chance to shine during The Rising Stars Of Quantitative Finance
  • Macro Insights - Hear From Julian Callow, Managing Director, Head Of International Economics, Head Of European Economics, BARCLAYS CAPITAL as well as David Bloom, Global Head FX Research, HSBC
  • Brand NEW Insights : In 2014 Global Derivatives welcomes more new speakers than ever before- academics, quants and more buy-side speakers than ever read more
  • More Traders, Investment Strategies & Buy-Side Participants Than Ever Before! 2014 offers the most diverse line-up of speakers, with NEW speakers, NEW perspectives offering invaluable insights
  • Don't Miss Out On More In-Depth Content - The Electronic Trading & Quantitative Investment Strategies Summit, Plus Pre- & Post-Conference Workshops
  • Get More Interactive At Global Derivatives 2014 - How could Global Derivatives celebrate its 21st birthday without some innovative new features and formats to ensure that everyone really enjoys the party?

Speaker

Speakers include many well known figures from the finance community, such as John Hull, Peter Carr, Bruno Dupire and Jim Gatheral. Saeed Amen, a co-founder of the Thalesians is also speaking on FX vol trading strategies.

Recent Events

Thalesian Seminar (London) — Vytautas Savickas — Deep Dive into basis spreads & FR replication

Vytautas Savickas

Date and Time

7:30 p.m. on Wednesday, 12 March, 2014.

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/168616932/

Abstract

This work thoroughly investigates the stochastic Libor-OIS basis spreads and the FRA replication problem. Libor-OIS basis has exploded since the start of the credit crisis and consequently, many derivatives pricing models relying on a unique risk-free rate became useless. Multi-Curve pricing became the new standard, but only few attempts were made to relate the Libor-OIS basis with Credit risk and price derivatives in this setting, which can have important implications for risk management practices such as Credit Valuation Adjustments (CVA). In this work we follow the footsteps of M.Morini and model FRA rates as an Option on Libor driven by CDS spreads of the Libor panel banks. We extend M.Morini’s model to multiple currencies and tenors, and show that even naive extension improves FRA replication for USD and GBP markets. Then, we construct FRA-implied volatility surface and a global best-fit volatility for joint-replication of FRA’s over all available maturities. We show that the original model performs well in general, but cannot fully replicate the FRA’s during periods of stress. To correct for the latter we introduce an uncertain-volatility model driven by two lognormal distributions for stochastic basis spreads. We show that one can jointly replicate series of 3-month and 6-month FRA’s with error very close or within the Bid/Ask spread levels. We finalize our work by analysing historical implied volatilities, which give a unique perspective on credit and liquidity effects in Libor markets during and after the peak of the crisis.

Speaker

Vytautas Savickas is a PhD student at Doctoral Training Centre in Financial Computing, University College London. His main research areas are interest rate modelling with basis risk, counterparty valuation adjustments and GPGPU computing.​

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,  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?

Please send your answers to paul, who happens to be at thalesians.com.

[ Solution ]

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