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Banking Supervision. From Black Holes to Black Scholes. March 2013 Ruth Corrigan. From Black Holes to Black Scholes. PhD Astrophysics – Institute of Astronomy, University of Cambridge - 1992
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Banking Supervision From Black Holes to Black Scholes March 2013 Ruth Corrigan
From Black Holes to Black Scholes PhD Astrophysics – Institute of Astronomy, University of Cambridge - 1992 Thesis Title: “Observational Manifestations of Gravitational Lenses” BSc Physics – Queens University Belfast – 1987
From Black Holes to Black Scholes Degree/PhD in Physics • Congratulations on being here! It’s a fantastic phase of your lives • Embarking on a PhD in Physics is not usually seen as a stepping stone to another career • Ending up in a different career is normally a two stage process:
From Black Holes to Black Scholes Why did you leave Astrophysics? What to do next? Considerations: Will significant re-training be required? Will the PhD be regarded as more than an undergraduate degree? I identified two areas where the PhD would be seen as a desirable requirement: Management Consultancy Finance How? – Talking to people Reasons for leaving Astrophysics is a major point of interest in every job interview I do • The difficulty of securing a permanent position in academia Being a research scientist can be very important to a person and to their image of themselves (not to be underestimated).
From Black Holes to Black Scholes Information and support • Cambridge Careers service • General advice on making a career change • Lots of specific information – particularly relating to Management Consultancy and Law. Management Consultancy Finance
From Black Holes to Black Scholes Career Trajectory
From Black Holes to Black Scholes Sources that worked for me spencerstuart.com sandh.co.uk imprintplc.com badenochandclark.com robertwalters.co.uk/ healy-hunt-partners.recruitmentsearcher.co.uk michaelpage.co.uk hoggett-bowers.com/
From Black Holes to Black Scholes efinancialcareers.co.uk EG Typing PhD into their browser yielded 68results in UK - one example of which is given below Analyst – Strats Division Successful members of our team hold Bachelors, Masters and Doctoral degrees in Physics, Engineering, Mathematics, Computer Science and many other fields. Although the work performed by Strats is financial in nature, applicants need not have specific financial knowledge or experience to apply. As a business unit, we are interested in bright individuals who have advanced mathematical and computational backgrounds and a willingness to learn about finance. We are interested in applicants who possess skills in several of the following areas: • • Mathematics: Understanding of partial differential equations, stochastic calculus, time series analysis, statistics and numerical techniques.• Technology: Experience building large-scale distributed systems, implementing fundamental algorithms and working in different programming languages.• Finance: Understanding of market dynamics and conventions, and of different products’ behaviors and specifications
From Black Holes to Black Scholes efinancialcareers.co.uk Typing “Graduate” into their browser yielded 146 results in the UK – one example of which is given below Leading European Hedge Fund – Risk Analyst Position • REQUIREMENTS: • - 2:1 or higher degree from a top tier university. • - Good Excel/VBA skills • - Strong numeracy skills • - A confident communicator with strong presentation skills. • - Desirable but not essential: knowledge of risk measures, experience of fund structures and managed accounts, programming experience in either SQL or .Net (C#/VB)
From Black Holes to Black Scholes Potential complexity is infinite Quantitative Analyst 1993 - 1998 Global Equity Derivatives – London & Frankfurt
From Black Holes to Black Scholes Quantitative Analyst – Global Equity Derivatives Black Scholes Equation See “Options Futures and Other Derivatives” by John C. Hull Assume that options can be perfectly hedged and derive using: Geometric Brownian Motion Wiener Process Stochastic Calculus V (S,T) is the option payoff S is the spot price T is the maturity R is the risk free interest rate σ is the volatility of S
From Black Holes to Black Scholes Black Scholes Formula for Call Option – obtained by solving BSE for Corresponding terminal & boundary conditions Wolfram Mathematica
From Black Holes to Black Scholes • Monitoring the risk of a £4bn Notional Exotic Option portfolio on the FTSE100 index • Producing the “Greeks”
From Black Holes to Black Scholes • Equity Derivatives • Risk Arbitrage (M&A) • Index Arbitrage • Volatility Traders • Financial Regulation – Economic Capital, Regulatory Capital Investment Risk Manager 2000 - 2002 Global Financial Risk Management
From Black Holes to Black Scholes • Risk Management of 5 single strategy hedge funds Head of Front Office Risk – 2002 – 2006 Dublin
From Black Holes to Black Scholes • Assessing banks own credit models – sovereigns, corporate, commercial & residential property • Assessing bank Operational and Market Risk models • Capital & Liquidity assessment reviews • EU-Wide Stress Testing Requires a broad and deep understanding of banking activity, including asset and liability management, credit portfolio management, treasury functions, complex risk and capital management issues Banking Supervision – Risk Analysis 2006 -
From Black Holes to Black Scholes Positives and Negatives
From Black Holes to Black Scholes If applying for finance jobs, be aware of recent significant events in finance
