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 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 (New York) — Dr. Attilio Meucci — Liquidity-, Funding- and Market-Risk

Date and Time

6:00 p.m. on Thursday,17th May, 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/61929382/

Abstract

We introduce a new framework to compute and stress-test liquidity risk, funding risk and market risk in fully general multi-asset class portfolios. Our approach, which goes beyond the simple bid-ask spread overlay to a VaR number, relies on three pillars: first, the Fully Flexible Probabilities approach, to model and stress-test market risk even in highly non-normal markets with complex derivatives; second, the literature on optimal execution, to model liquidity risk as a function of the actual trading involved; third, an analytical conditional convolution, to model funding risk, whereby different trading decisions are made in different market scenarios. As a side product of our approach we introduce a definition of liquidity score, a monetary measure of portfolio liquidity based on the additional tail risk added by lack of liquidity.

Speaker

Attilio Meucci is a pioneer in advanced risk and portfolio management. His innovations include Entropy Pooling (technique for fully flexible portfolio construction), Factors on Demand (on-the-fly factor model for optimal hedging), Effective Number of Bets (entropy-eigenvalue statistic for diversification management), Fully Flexible Probabilities (technique for on-the-fly stress-test and estimation without re-pricing), Copula-Marginal Algorithm (algorithm to generate panic copulas), and Liquidity Conditional Convolution (technique to generate liquidity- and funding-risk adjusted portfolio distribution).

Attilio Meucci is the Chief Risk Officer and Director of Portfolio Construction at Kepos Capital LP. He is the founder of SYMMYS, under whose umbrella he designed and teaches the six-day ARPM Bootcamp, and manages the charity One More Reason. Previously, Attilio was the head of research at ALPHA, Bloomberg LP's portfolio analytics and risk platform; a researcher at POINT, Lehman Brothers' portfolio analytics and risk platform; a trader at the hedge fund Relative Value International; and a consultant at Bain & Co, a strategic consulting firm.

Concurrently, he taught at Columbia-IEOR, NYU-Courant, Baruch College-CUNY, and Bocconi University. Attilio is the author of Risk and Asset Allocation - Springer and numerous other publications in practitioner and academic journals. He holds a BA summa cum laude in Physics from the University of Milan, an MA in Economics from Bocconi University, a PhD in Mathematics from the University of Milan and is a CFA charterholder.

Slides

To be published here

Disclaimer

This is not an instructional program of the New York Public Library.

Thalesian Seminar (San Francisco) — Dr. Jeremy Evnine — The "Accidental Quant"

Hosting

The Thalesians gratefully acknowledge the support of the Golden Gate University Finance Club as a sponsor.

Date and Time

7:00 p.m. on Wednesday, 30th May, 2012.

Venue

5310 GGU, 536 Mission St, San Francisco

Meetup.com

Members can register for this event on Meetup.com: http://events.thalesians.com/events/61933512/

Abstract

I became a “quant” in September of 1980, purely by accident. This led me to a 30-year career in quantitative asset management, from the days when “high frequency” meant daily data and all screens were green, to the days when time is measured in milliseconds and many institutional investors are left wondering what to do in the wake of the worst financial crisis in three generations.

In this talk, I will reflect on some of the lessons I have learned in my career as a quant, and try to draw some useful conclusions from them. Some of these lessons are idiosyncratic to quantitative investing and risk management, while others are more general lessons about being in the asset management business…indeed, about being in business at all.

Speaker

Jeremy Evnine is currently CEO of Evnine & Associates, Inc., an Investment Advisory firm engaged in quantitative strategies since 1992. From 1991 to 2003, Jeremy was also a partner in Iris Financial Engineering and Systems, a financial software firm specializing in providing high-end trading and risk systems to top-tier investment banks. He sold his interest in Iris in 2003.

From 1984-1990, Jeremy was SVP in charge of research at WFIA (now Barclays Global Investors). In this capacity, he worked with such people as Fischer Black and Myron Scholes, Bill Sharpe, and Michael Brennan and Eduardo Schwartz. From 1980-1984, Jeremy was a consultant at Barra, where he developed the firm’s option products.

Jeremy earned his B.Sc. in Mathematics at Manchester University in England, his M.Sc. in Pure Mathematics at the Hebrew University of Jerusalem, and his Ph.D. in Operations Research and Finance at U.C. Berkeley. He has taught courses in finance at U.C. Berkeley, published articles in the financial literature on option pricing and tactical asset allocation, and lectured in the United States and abroad.

Thalesian Seminar (London) — Dr. Matthew Dixon — A Bayesian Approach to Discovering Private Companies for Private Equity Investments

Date and Time

7:30 p.m. on Wednesday, 16th May, 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/58583992/

Abstract

Silicon Valley is currently host to company growth rates and exit valuations of unprecedented levels. Take, for example, the recent purchase of Instagram by Facebook for $1 Billion, representing a 20x return on total investment in only two years. In the absence of any formulaic approach to pick the best companies to invest in, investors base investment decisions on their prior experiences and fundamental analysis of companies within an industry sector. Growth stage private companies, however, often have investment transaction histories from which characteristics associated with successful and failed companies (labelled companies) may be discerned using machine learning methods. One of the primary challenges in pursuing this approach is the sparsity of the historical data. This talk describes a three step approach based on (i) extracting features; (ii) training Support Vector Machines (SVMs) from labelled companies and then evaluating the model performance based on out-of-sample labelled data and (iii) applying a novel Bayesian approach to rank companies within a cohort which combines models trained on lower dimensional feature sets. Focussing on particular industry sectors, we demonstrate how this approach can be used to identify likely winners and losers based on a number of key investment history characteristics.

Speaker

Matthew Dixon is a Managing Director and Head of Americas at Thalesians Ltd.

Matthew Dixon is quant analyst consultant and founder of Quiota, LLC which is based in Silicon Valley. Previously he was a visiting assistant professor in applied mathematics at UC Davis where he specializes in applied numerical analysis and scientific computing. He previously held postdoctoral research appointments with the Computer Science Department at UC Davis and the Institute for Computational and Mathematical Engineering at Stanford University. Matthew graduated with a PhD in applied mathematics from Imperial College in 2007 and a MSc in parallel and scientific computation (with distinction) from Reading University in 2002. He is a regular speaker at computational finance events and in between his studies has worked for various investment banks in London.

Video

To be published here

Slides

To be published here

Resources

• N/A

Innovations in Analytics (London) / Murex Symposium (External Events)

Date and Time

Tuesday, 8th May 2012

Venue

Chartered Accountants’ Hall, Moorgate Place, London EC2R 6EA, UK

Register

http://murex.wufoo.com/forms/murex-symposium-london-08-may-2012/ (First come first served!)

Abstract

Significant market movements during recent years have put the spot light on particular behaviours such as introducing spreads between rate curves or highlighting more pronounced correlations between spot and volatilities. Requirements for accuracy in quasi real-time are also growing in line with regulatory requirements, and all this under the spectre of constrained IT budgets. In such an environment of increasing complexity, financial companies are facing one obligation: the necessity to innovate. During this symposium, Murex will present its research and engage a distinguished panel of leading practitioners and symposium participants into a thought provoking discussion on the following topics:

• Should we model spreads as being stochastic?
• Is it possible to define a model consistently integrating the spot/vol dynamic for all asset classes?
• What are the good technology choices today to reach the right balance between accuracy and performance?

Speaker Panel

John Ashley, Senior Solutions Architect, NVIDIA - Elie Ayache, Co-founder and CEO of IT033 - Nordine Choukar, Senior Manager, Mazars Actuariat - Elias El Ramy, Global Head of Functional and Applications Architecture (ITEC/ARC/FAA) at SGCIB - Igor Hlivka, Co-Head of Quantitative Solutions Group, Mitsubishi UFJ Securities International, London - Clarke Pitts, Derivative Trader - Uwe Wystup, Managing director of the MathFinance group

Recent Events

Thalesian Seminar (London) — Dr. Max A. Little — A functional minimization approach to level shift detection

Date and Time

7:30 p.m. on Wednesday, 11th April, 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/58583992/

Abstract

Level shifts are ubiquitous in financial datasets: examples include abrupt changes in macroeconomic outlook (growth versus recession) and changes in trends in security prices. Knowing when the level of a time series has changed and the value of the levels, is critical to accurate decision-making under uncertainty. For this, and other reasons, the problem of detecting level shifts, first studied in the 1940's in process control, is of enduring interest. In this talk I will detail a set of simple, novel, generalized, nonlinear algorithms for this problem. These algorithms are based on a global functional which, when minimized, finds the maximum a-posteriori location of the shifts and values of the levels. The global functional subsumes some well-known algorithms for this problem that have been developed in digital image processing contexts, and also folds in several algorithms from statistical machine learning that have hitherto been seen as distinct. The algorithms are computationally simple, and many are convex optimization problems for which standard, fast implementations are available.

Speaker

Max Little began his career writing software, signal processing algorithms and music for video games, and then moved on by way of a degree in mathematics to the University of Oxford. After postdoc positions in Oxford and co-founding a web-based image search business, he won a joint MIT-Wellcome Trust fellowship to follow up on his doctoral research work in biomedical signal processing. His research focuses on applied models and statistical signal processing for a range of problems across the sciences, including biomedicine, econometrics, biology, hydrology and meteorology.

Video

To be published here

Slides

To be published here

Resources

• Max Little's website: http://www.maxlittle.net/

Attilio Meucci Quantitative Techniques for Portfolio Management / MathFinance Conference Frankfurt (External Events)

Date and Time

Monday, 26th March, 2012 - Tuesday, 27th March, 2012 (MathFinance Conference), Wednesday, 28th March, 2012 (Attilio Meucci Quantitative Techniques for Portfolio Management)

Venue

Deutsche National Bibliotek (tbc)

Register

http://conference.mathfinance.com (MathFinance Conference) and http://mathfinance2.com/Services/Training/TrainingDetails/152/152 (Attilio Meucci Quantitative Techniques for Portfolio Management)

Abstract

The MathFinance Conference is intended for practitioners in the areas of trading, quantitative or derivative research and risk and asset management as well as for academics studying or researching in the field of financial mathematics or finance in general. The talks during the two days of the conference cover a broad range of current topics and are presented by internationally known academics and practitioners. There will be enough time for questions and discussions after each talk and additional breaks provide you the opportunity to build networks within the quantitative finance community. Speakers include Saeed Amen from the Thalesians and many others.

Attilio Meucci's course on Quantitative Techniques for Portfolio Management will cover the following topics: “P” vs. “Q”: the two worlds of quantitative finance Linear Factor Models (LFM) Estimation risk and generalized stress-testing Diversification Management Portfolio Construction Liquidity risk stress-testing

Speaker

Attilio Meucci is a pioneer in advanced risk and portfolio management. His innovations include Entropy Pooling (technique for fully flexible portfolio construction), Factors on Demand (on-the-fly factor model for optimal hedging), Effective Number of Bets (entropy-eigenvalue statistic for diversification management), Fully Flexible Probabilities (technique for on-the-fly stress-test and estimation without re-pricing), Copula-Marginal Algorithm (algorithm to generate panic copulas), and Liquidity Conditional Convolution (technique to generate liquidity- and funding-risk adjusted portfolio distribution).

Attilio Meucci is the Chief Risk Officer and Director of Portfolio Construction at Kepos Capital LP. He is the founder of SYMMYS, under whose umbrella he designed and teaches the six-day ARPM Bootcamp, and manages the charity One More Reason. Previously, Attilio was the head of research at ALPHA, Bloomberg LP's portfolio analytics and risk platform; a researcher at POINT, Lehman Brothers' portfolio analytics and risk platform; a trader at the hedge fund Relative Value International; and a consultant at Bain & Co, a strategic consulting firm.

Concurrently, he taught at Columbia-IEOR, NYU-Courant, Baruch College-CUNY, and Bocconi University. Attilio is the author of Risk and Asset Allocation - Springer and numerous other publications in practitioner and academic journals. He holds a BA summa cum laude in Physics from the University of Milan, an MA in Economics from Bocconi University, a PhD in Mathematics from the University of Milan and is a CFA charterholder.

Thalesian Seminar (London) — Dr. Oleg Ruban — Designing Scenarios for Sovereign Stress in the Eurozone

Date and Time

7:30 p.m. on Wednesday, 28th March, 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/57165632/

Abstract

The evolution of the financial crisis in Europe has lead to a broad re-assessment of credit risk. Sovereign bonds previously considered virtually risk free turned into assets with non-negligible default risk. Due to the linkages between financial markets, sovereign risk in one country may have important knock-on effects for the corporate and banking sectors at home and abroad, as well as other sovereign issuers.

In this presentation, we will show how stress tests can be used to analyze the risk to portfolios due to sovereign distress. Forward looking hypothetical scenarios are a core part of the suite of stress tests that institutional investors should include in their stress testing programs. Hypothetical scenarios help identify portfolio vulnerabilities by allowing the simulation of a wide range of outcomes, including shocks that result in the breakdown of statistical patterns. We can systematize the scenario construction process through a set of decisions about the factors, horizon and risk climate that characterize the stress event.

Speaker

Oleg Ruban is Vice President in the EMEA Applied Research Team at MSCI Inc, 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.

Mr. Ruban focuses on portfolio management and risk related research for asset owners and investment managers. He started his professional career as a graduate trainee in derivative sales at the Royal Bank of Scotland and later worked as an emerging market economist and a quantitative strategist at Dresdner Kleinwort in London.

Mr. Ruban has an undergraduate degree in Economics and Management from the University of Oxford and MSc degrees in Economics and Finance from the University of Warwick and Manchester Business School respectively.

He also has a PhD in Finance from Manchester Business School, where his dissertation topic was the pricing of financial instruments in incomplete markets. His paper entitled GDP Linked Bonds: Contract Design and Pricing won the Best Paper In Fixed Income Award at the Financial Management Association Annual Meeting in Texas in 2008.

Video

To be published here

Slides

To be published here

Resources

• Marshall Wace website: http://www.mwam.com/

Thalesian Seminar (New York) — Prof. Mike Lipkin — Event Driven Finance

Date and Time

6:30 p.m. on Thursday, 29th March, 2012.

Venue

Location: Baruch MFE Conference Room 6-215, Baruch College/CUNY One Bernard Baruch Way (55 Lexington Avenue at 24th Street) New York NY 10010

Meetup.com

Members can register for this event on Meetup.com: http://events.thalesians.com/events/53576882/

Abstract

The economy is a driven dynamical system. The fundamental equations of finance are thermodynamic; they describe static, equilibrium, properties. This means that the following paradoxical statement is true: When our models work there is nothing to trade. We look at the time scales suitable for real trading, and what we should expect to see.

Speaker

Michael Lipkin has worked as an option trader and market maker at Katama Trading, LLC since 1991. During this time, he has developed a number of strategies in equity derivatives and mixed strategies in equity/derivatives -all based at intermediate times around events such as earnings, take-overs, hard-to-borrows, etc.

Michael is also an adjunct professor in financial engineering at Columbia University where he teaches a course on “Experimental Finance”. He has made several important literary contributions in the fields of quantitative finance, physical chemistry and bridge. Michael is a Ph.D. graduate from the University of Chicago and majored in Mathematics and Chemistry at MIT

Sponsorship

The Thalesians are very pleased to gratefully acknowledge the support of the MFE program at Baruch College/CUNY. Please visit http://mfe.baruch.cuny.edu/ for further details of the Baruch MFE program.

Thalesian Seminar (London) — Dr. Attila Vrabecz — kdb+/q in practice

Date and Time

7:30 p.m. on Wednesday, 14th March, 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/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 (San Francisco) — Prof. Lisa Goldberg — Contractual Tail Risk Hedging and Minimizing Shortfall

Hosting

The Thalesians are pleased to host this talk in conjunction with a GARP San Francisco Chapter meeting. GARP does not in anyway endorse or support the Thalesians. The Thalesians gratefully acknowledge the support of the Golden Gate University Finance Club as a sponsor.

Date and Time

7:00 p.m. on Wednesday, 7th March, 2012.

Venue

5311-5312 GGU, 536 Mission St, San Francisco

Meetup.com

Members can register free-of-charge for this event on Meetup.com: http://events.thalesians.com/events/43711552/

Abstract

Can Tail Risk Be Hedged?

Tail risk hedge is a catchall for strategies that are contractual (derivative-based), macroeconomic or statistical. It also applies to a wide range of structured products and funds that are available for purchase. We discuss the principles underlying contractual tail risk hedges and we provide an empirical assessment of the value they offer.

Speaker

Lisa Goldberg is Executive Director of Applied Research at MSCI with oversight of the Asset Owner Client Segment. Her research interests include long horizon risk forecasting, liability driven investing, stress testing and simulation, statistical model evaluation, credit, and green investing. Dr Goldberg was instrumental in the early development of MSCI’s global bond product and integrated risk models, and she is the primary architect of Barra Default Probabilities and Barra Extreme Risk. She has been awarded four patents.

Prior to joining MSCI in 1993, Dr Goldberg was a Professor of Mathematics at UC Berkeley and City University of New York, and she has held positions at The Institute for Advanced Study, Institut des Hautes Études Scientifiques and The Mathematical Sciences Research Institute. Dr Goldberg received a PhD in Mathematics from Brandeis University in 1984 and has received numerous academic awards including the Sloan Fellowship.

An Adjunct Professor of Statistics at UC Berkeley, Dr. Goldberg publishes and lectures extensively in both financial economics and mathematics. She is Book Review Editor for Quantitative Finance and Associate Editor of The Journal of Investment Strategies. She serves on the Board of the Journal of Investment Management conference series, on the Editorial Board of two Springer book series, and as Moderator for arXiv Quantitative Finance. Dr. Goldberg is co-author of Portfolio Risk Analysis, published in 2010 by Princeton University Press.

Video

To be published here

Slides

To be published here

Resources

Thalesian Seminar (London) — Dr. Sergey Nadtochiy — Static Hedging of Barrier Options: Exact Solutions and Semi-robust Extensions

Date and Time

7:30 p.m. on Wednesday, 22nd February, 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/52187352/

Abstract

We solve the problem of static hedging of standard (call, put and digital) barrier options in models where the underlying is given by a time-homogeneous diffusion process with, possibly, independent stochastic time-change. Our results include an analytic expression for the payoff of a (single) European-type contingent claim (which pays a certain function of the underlying value at maturity, without any path-dependence), such that it has the same price as the barrier option at all times up until hitting the barrier. We then address the practical issues associated with the above static hedge; in particular, we investigate the performance of the approximate static hedge consisting of vanilla (call and put) options of two strikes only. Finally, we show how the above results allow to construct static sub- and super-replicating strategies which are semi-robust with respect to implied volatility. More precisely, for a given range of the implied volatility values, we construct the static sub- and super-replicating strategies which work in any continuous model for the underlying, as long as the corresponding implied volatility stays within the prescribed range.

This seminar is based on joint work with Peter Carr and Jan Obloj.

Speaker

Dr. Sergey Nadtochiy was born and grew up in Moscow.

He earned his BA and MS degrees at Moscow State University, Mathematical Department, specialising in Probability Theory. His adviser was Albert Shiryaev.

He graduated from Moscow State University in 2005 and move to Princeton University, where he got a PhD degree in financial engineering in 2009, under the supervision of Rene Carmona.

While at Princeton, he did several internships on Wall Street: at Bloomberg L.P., doing quantitative research in finance (here he met Peter Carr and started collaborating with him), and at J.P. Morgan in quantitative research-driven trading (doing proprietary trading).

Video

To be published here

Slides

To be published here

Thalesian Seminar (San Francisco) — Prof. Alper Atamturk — Implications of Conic Optimization for Portfolios and Risk

Date and Time

7:00 p.m. on Wednesday, 8th February, 2012.

Venue

Rms 5312 GGU, 536 Mission St, San Francisco

Meetup.com

Members can register for this event on Meetup.com: http://events.thalesians.com/events/46755972/

Abstract

Portfolio optimization is going through a revolution with the recent algorithmic advances in conic optimization. By generalizing quadratic optimization, conic optimization allows new ways of modeling and solving a broader class of risk optimization problems efficiently. In this talk, we will give a brief introduction to conic optimization and describe applications in factor modeling, portfolio optimization, transaction cost modeling, value-at-risk minimization. We will go over new techniques for solving hard mixed-integer conic optimization problems. Finally, we will introduce the recently launched Bloomberg Portfolio Optimizer built on top of this new technology.

Speaker

Alper Atamturk is a chancellor's professor in the Department of Industrial Engineering & Operations Research at the University of California-Berkeley and head of optimization research at Bloomberg LP. He received his Ph.D. from the Georgia Institute of Technology in 1998 with a major in Operations Research and minor in Computer Science. His research interests are in the broad area of optimization, including conic optimization, mixed-integer programming, and robust optimization with applications to finance and operations.

He serves on the editorial boards of Journal of Risk, Discrete Optimization, Operations Research, and Networks. He regularly serves on the organizing committees of optimization conferences. He served as elected vice chair-integer programming of INFORMS Optimization Society. Professor Atamturk was appointed a national security fellow by the US Department of Defense in 2010.

Sponsorship

The Thalesians gratefully acknowledge the support of the Golden Gate University Finance Club as a sponsor.

Resources

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.

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 (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. 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

Thalesians_Joshi_20110629.pdf

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 b_k 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 ]