Financial Mathematics Practitioners Seminar

Spring 2018

Financial Mathematics Graph

This seminar series hosted by the MSc in Financial Mathematics at UCL presents applied research in financial mathematics and related topics. It aims to bring together mathematicians working in the financial industry and researchers in Mathematical Finance. Attendance is open to the public.

All seminars (unless otherwise stated) will take place on Wednesday from 4.10pm to 5.00pm in Harrie Massey LT, 25 Gordon Street or in Roberts Building G06 Sir Ambrose Fleming LT, Torrington Place. There will be tea and coffee afterwards. If you require any more information on the Financial Mathematics Practitioners Seminars please contact Dr Camilo Garcia Trillos (e-mail: camilo.garcia AT ucl.ac.uk) or Miss Justine Walker (e-mail: justine.walker AT ucl.ac.uk).

31 January 2018

Venue: Harrie Massey LT, 25 Gordon Street

Speaker: Dr Paul McCould (Nomura)

Title: From Quadratic Gaussian to Quantum Groups: Dual *-Hopf Algebras in Financial Derivatives Pricing

Abstract: 

Mathematical finance explores the consistency relationships between the prices of securities imposed by replicability and the absence of arbitrage. These economic principles, essentially algebraic in nature, can be applied in the context of quantum probability as well as the more familiar classical setting.

In this talk, mathematical finance is developed from the perspective of quantum groups. This naturally leads to the study of models based on restrictions of the quantum group, such as the Quadratic Gauss model, that retain much of the phenomenology of their parents within a more tractable domain, and extensions of the quantum group, such as the Linear Dirac model, with novel features unattainable in the classical case.

Reference: “Quantum Duality in Mathematical Finance

Bio:

Paul began his career in finance in 2000 and has been at Nomura since 2008, working on exotic rates modelling, business resource management, and flow rates etrading. Highlights include the development of the CMS Triangle Arbitrage trade in 2010, founding the flow rates etrading quant team, and more recently managing the global fixed income quant team. Prior to working in finance Paul was a theoretical physicist, and in 2015 he returned to academia as an industry researcher in the Mathematics department at UCL, with research interests in applying quantum group methods to IR-FX hybrid derivative pricing.

21 February 2018

Venue: Roberts Building G06 Sir Ambrose Fleming LT

Speaker: Dr Gerardo Ferrara (Bank of England)

Title: Central counterparty auction design

Abstract:

We analyse the role of auctions in managing the default of a clearing member in a Clearing House (CCP). Effective management of the default of a clearing member is an important element of a CCP's risk management framework in order to reduce the potential for financial contagion arising from the default of a clearing member. An auction allows the CCP to find one or more clearing members to take on the positions of the defaulted member and thereby restore a matched book. At the same time, the outcome of the auction determines: whether any losses are covered by the revenue generated for the CCP by the auction; whether these are covered by the defaulted member's margin (and/or default fund contributions); and whether residual losses must be allocated to CCP capital. An empirical analysis indicates that the default of a CCP’s top two clearing members could result in defaults of the same entity or affiliates in up to 23 other CCPs included in this analysis. This implies that the default of a clearing member could potentially push clearing members to participate in several auctions at the same time within different CCPs. For this reason, it is important to investigate the revenue outcomes of alternative auction designs, while also examining the mechanisms intended to incentivise more competitive bidding. In order to study the effect of different auction formats, we first consider two established sealed bid auction formats in which clearing members simultaneously submit bids for a defaulting clearing member's portfolio: first price without penalty and first price with penalty. Under our assumptions regarding bidder behaviour, although the revenue of the portfolio might be the same for the different auction formats mentioned above, the use of some form of penalty could have significant implications for financial stability by inefficiently distributing losses to surviving clearing members. In response to these potential adverse implications, we propose a third auction type -- second price with loss sharing -- which increases the revenue.

Bio:

Gerardo is a research economist at the Research Hub in the Bank of England. His interests include topics within the areas of market structure, macroprudential and microprudential policies and their interactions, international macroeconomics, political economy, international financial integration, banking, and systemic risk. He has a PhD in Statistics and Applied Mathematics from the joint program at Vilfredo Pareto Doctorate in Economics (University of Turin) and Collegio Carlo Alberto, where he has also taught graduate level economic courses. Prior to joining the Bank of England, Gerardo also worked in the private sector as a quantitative analyst on issues related to different areas including asset management, risk management, and policy implementation.

28 February 2018

Venue: Roberts Building G06 Sir Ambrose Fleming LT

Speaker: Dr Roel Oomen (Deutsche Bank)

Title: Electronic FX trading – where Game Theory meets Data Science

Abstract:

In this talk, Roel will discuss recent developments in electronic FX trading and show how data science applied to dense (as opposed to big) financial data can be used to make practical decisions around execution optimisation. He will go over a  number of case studies taken from a live trading environment.

Bio:

Roel is the global co-head of electronic FX spot trading at Deutsche Bank. He started his industry career as a quant in cash equity algo trading in 2006. Prior to that he was in academics, most recently as a tenured associate professor of finance at the Warwick Business School. Roel holds a PhD in econometrics, is a senior research fellow at the London School of Economics, and has published widely on the econometric analysis of high frequency data.

9 March 2018

Time: 16:30-17:30

Venue: Room D103, 25 Gordon Street

Speaker: Dr Jan Witte (Record Currency Management)

Title: Machine Learning Principles in Practice: A Case Study

Abstract: Using the construction of an FX volatility strategy as an example, we give a detailed account of how mainstream machine learning principles have to be amended to become applicable to the real-world case of testing for a realistic and implementable strategy.

Bio: Dr Jan has a Diploma in Mathematics from RWTH Aachen University in Germany and a DPhil in Numerical Analysis from Oxford University. After graduating from Oxford in 2011 and a short time as a postdoc, Dr Jan joined Recod Currency Management and has been working as an FX quant since.

14 March 2018

Venue: Roberts Building G06 Sir Ambrose Fleming LT

Speaker: Dr Marco de Innocentis (Credit Suisse)

Title: Heston Calibration for Counterparty Credit Risk

Abstract:

We describe a fast new method for a market implied calibration of the Heston (1993) model for equity, based on an improved version of the parabolic algorithm of Levendorskii (2012). This pricing method, when used in the calibration, is much faster and more accurate, and better reproduces the implied volatilities, than alternative methods which are popular with practitioners. As such, it is suitable for use in a typical IMM counterparty risk engine. We also show that the Heston model, calibrated to the implied volatility surfaces between January 2010 and December 2016, performs well in historical backtesting for a range of exception counting and distributional tests across multiple time horizons. Finally, we show how the procedure can be modified to better reproduce the prices of some exotic derivatives.

Bio:

Marco is a senior quantitative analyst in the Exposure Modelling team within the Investment Banking Division of Credit Suisse. His areas of expertise include counterparty credit risk modelling, derivative pricing, stochastic volatility and jump processes. The main focus of his current work is the development of Monte Carlo simulation and pricing models for exposure calculation of bilateral OTC derivatives. Marco is an Honorary Fellow at the University of Leicester, holds a Ph.D. in Mathematics and has authored several articles in peer-reviewed journals in the fields of Quantitative Finance and Integrable Systems.


Previous Financial Mathematics Practitioners Seminars