How could the Dutch economy get out of its current slump? Are the current budget cuts going too far or do we need even more austerity measures? Will the Dutch housing market recover? How reliable are econometric forecasts? How can the models underlying these forecasts be improved?

While one might think that each of these questions by itself was complex enough, Coen Teulings managed to address all of them in this year’s TopQuants key note. The University of Amsterdam professor of Economics and former director of the Centraal Planbureau (CPB, the Dutch Bureau for Economic Policy Analysis), is well-known for his outspoken criticisms of the post-2008 austerity measures. But Coen’s presentation at the TopQuants event covered besides the optimal timing of austerity also a range of other topics, including the pros and cons of different pension schemes and the role of Bayesian methods in economic forecasting.

Albeit himself not a quant, Coen clearly enjoyed explaining to the quant audience at this key note event his analysis of the state of the Dutch economy and his opinion on the policy measures it requires. In a terminology very akin to that spoken in banking, he described the Dutch balance sheet as “long pension claims – long real estate – short mortgages”. With a wink, he said that in this respect the Netherlands looked like “one big hedge fund”. He stated that reductions in mortgage deductibility should go hand in hand with budgetary expansion and structural reforms of the Dutch housing market, arguing that a higher share of commercial rental housing would make the Dutch economy as a whole more flexible. Coen also expressed his opinion that – in the light of financial market volatility – it was time to reassess the pros and cons of pay as you go and funded pension schemes.

This combination of topics from economic research, econometric forecasting and quantitative finance dished up by Coen clearly matched very well the taste of the audience. It triggered questions by several of the over 100 attendees already during the presentation and was followed by an equally lively panel discussion.

TopQuant Bert-Jan Nauta facilitated the discussion by confronting panel members with a number of statements and asked them to comment. All panel members agreed that econometric forecast models failed abominably in the crisis year 2008. Nonetheless, Sandra Muijs (Head of Model Development at SNS Bank) pointed out that the credit crunch had made decision-makers in finance more aware of model risk, which in turn had made it easier for quants to discuss model risk uncertainty with senior management. Robert Daniels (Senior Client Risk Manager at Cardano) argued that most professionals in finance had lacked the imagination to include a scenario similar to the credit crunch in their simulations prior to 2008, and if they did had grossly underestimated its probability and impact. He recommended that we “shift the discussion from how likely something is to what we would do if something happened”.
The discussion then turned to austerity. Coen, not only key note speaker but also panel member, said that the austerity measures were going too far, arguing that “politicians nowadays want to be on the safe side – that is part of the problem”. Some of the other panel members did not hide their disagreement with the key note speaker. Robert asked critically how the mounting government debt could ever be paid back. Prompted by the case of Japan being cited as a bad example, David Schrager (Head of Single Premium Variable Annuity Trading at ING bank) remarked provocatively: “I have lived in Japan for a few years. If that’s a country in crisis, then give me 20 years of that!”

Similar to other TopQuants events, the panel discussion was followed by complimentary drinks and snacks during the informal networking part.

TopQuants are grateful to SNS Reaal for sponsoring and hosting the event. In particular, we would like to thank Pim Poppe for his kind words of welcome. Special thanks go to the key note speaker, all panel members as well as to the quant audience for making this another successful TopQuants event. More information on this and future events will be published in the next TopQuants newsletter.

The TopQuants Team

Utrecht – May 22, 2013 , 15:00h

TopQuants is the Dutch networking organisation – by quants for quants. TopQuants aims to bring the quantitative community of the capital markets in the Netherlands closer together.

On May 22nd, the next interactive symposium, TopQuants Spring Keynote 2013 will take place at SNS Reaal’s headquarters in Utrecht. You are cordially invited to join this event.

As special guest, Gerard van Olphen (CEO SNS Reaal) will start the event with an opening speech. The keynote session of the event will be:

“Macro-economic forecasting in times of crisis”

by Coen Teulings

For the past seven years, Coen Teulings was director of the CPB, the Dutch Bureau for Economic Policy Analysis. In this position, Coen has developed an in-depth view on many topical economic questions, like the budgetary process during times of crisis, the housing market and the Euro-zone. His keynote speech will cover the following topics:

• The crucial role of Bayesian econometrics for forecasting with large VAR models
• Financial market volatility and the trade-off between pay as you go and funded pension systems
• Optimal timing of austerity
• The slump on the housing market and the Dutch economy

TopQuants Spring Keynote 2013 also features a panel discussion aimed to provide a lively and exciting exchange of ideas between the keynote speaker, invited quantitative financial professionals, and you, the audience. Panel members include Coen Teulings and other quantitative professionals, such as:

• David Schrager, Head of Single Premium Variable Annuity Trading at ING Bank. David’s experience passes by ABN AMRO and ING Life Japan, and his focus is the design and risk management of complex financial and insurance products.
• Sandra Muijs, Head of Model Development at SNS Bank. Sandra holds this position since three years, after being the head of Model validation unit in SNS, coming from a strong academic background.
• Robert Daniels, Senior Client Risk Manager at Cardano. Robert started his career in consulting in emerging markets, and then moved to DNB for seven years, before joining Cardano.

TopQuants Spring Keynote 2013 concludes with drinks and snacks for all participants. This provides ample opportunity for informal discussions and networking.

Programme

15:00 Welcome and registration
15.45 Opening speech by Gerard van Olphen
16.00 Key note speaker Coen Teulings
17.00 Open panel discussion by the panel members
18.00 Snacks and drinks

Location

The event is hosted by SNS Reaal, and held at their headquarters, Croeselaan 1, Utrecht. This is located at short walking distance from Utrecht central railway station.

Registration

Participation is free of charge, but advance registration is required: deadline for registration is May 9th, 2013. To register, please complete this form and send it to springevent@topquants.nl.

Given the limited number of seats, please respond as soon as possible.

Note

You can invite friends and colleagues working with derivative pricing models, trading book risk models (market risk and counterparty exposure risk), economic capital models, banking book ALM models, and model validation in the areas mentioned above, by forwarding this email to them.

We look forward to meeting you.

Best regards,
TopQuants

The TopQuants team is pleased to present the first issue of our newsletter. We intend to publish the newsletter semi-annually from now onwards. As with all our efforts, it is
intended to serve the quant community in the Netherlands. We would like to stay in touch with you, keep you posted between our two events, namely the spring keynote and the autumn/ winter workshops.

In the newsletter, you can expect to find news relevant to the quant community, technical articles, and additional information on recent events as well as announcements of future events. We hope that this matches with your interests. But the newsletter is also what you make of it! We are open to your suggestions, and are looking forward to receiving your comments and contributions. If there is a topic you would like to bring to the
attention of your fellow quants in this country, why not write an article about it for this newsletter? Please contact us to discuss how it may be done.

This issue of the newsletter starts with an interview we have recently conducted with SNS, the main sponsor of our upcoming keynote event in May 2013. A “save-the-date” email for this event will follow soon. The newsletter also includes summaries of all
the parallel sessions held at the 2012 TopQuants autumn workshop – handy if you want to refresh your memory of the session you have attended or find out about all those interesting sessions you could not attend personally. Note that in some summaries
we have also included updates, i.e. recent research developments from the speaker after the event.

This issue also features two technical articles. In the first article, Cyril Schmidt from the Quantitative Trading Risk Analytics Group in ABN AMRO discusses the personal experiences of his team with GPU programming, its benefits and the issues they
encountered. In another joint article, Eric Beutner, Antoon Pelsser and Janina Schweizer from the Department of Quantitative Economics, Maastricht University, present a novel analytical framework for statically replicating contingent claims through
orthonormal basis functions, in the context of insurance liabilities. Antoon is of course well-known to regular attendees of TopQuants events as the key note speaker of 2012.

We hope you will enjoy reading this newsletter and we look forward to seeing you at the upcoming TopQuants event(s).

Aneesh Venkatraman
(on behalf of TopQuants)

TopQuants are very pleased that the programme and format of the event match so well with the interests of the Dutch quant community. Diederik Fokkema (E&Y and founding member of TopQuants) commented after the event: “I am extremely pleased with this turnout. I am grateful to our sponsor for allowing us to confirm so many registrations, even though we have put the capacity of the venue to somewhat of a stress test.”

After a short welcome note, the main part of the workshop started. Reflecting the TopQuants principle “by quants for quants”, the event offered parallel sessions with about ten speakers from banks, audit and consultancy firms as well as from academia. Topics ranged from overview presentations to more technical talks, spanning a broad spectrum – from the impact of regulation on the financial sector, industry surveys on counterparty risk, via curve building techniques and their implementation all the way to new models fresh from the desk of the academic researcher. Participants could attend two sessions. Many used this opportunity to combine an industrial survey presentation and a more technical talk, others picked both sessions from the same field.

Harmenjan Sijtsma (Rabobank International) talked about the Fundamental Review of the Trading Books, presenting in an interactive style and asking the audience for the opinion several times. Harmenjan thinks that new regulation will have a major impact on the market risk modelling within banks and expressed his concerns that increased regulatory capital requirements might reduce the willingness of financial institutions to provide loans to the market.

The event offered two presentations by representatives of large audit and financial consultancy companies. Paul Wessels and Jeroen Heijneman (both KPMG) talked about The impact of the accumulation of regulation on the Dutch banking sector. Frank de Jonghe and Siobhan Tipping (both E&Y) presented Market impressions on counterparty credit risk: from CVA over IMM to FVA. During the networking part, several participants commented positively on such overview presentations; one of them said: “I have worked for the same bank for several years and know how we approach these things. Now I have a better idea about how others look at this.”

Ever since the credit crunch, curve building has been a much-discussed topic in the quant community. It has also featured prominently at this year’s TopQuants autumn event, its various ramifications being touched on during several talks. The Ultimate Forward Rate – Background, Issues and Impact was presented by Roger Lord (Cardano), as his co-presenter Joeri Potters (also Cardano) could not attend the event. The Ultimate Forward Rate, ie. a method in which forward rates tend to a fixed forward rate, has been proposed in Solvency II. Roger discussed the pros and cons of this approach and its impact on the valuation of the long-term liabilities of insurance companies and pension funds, as well as some mathematical properties and curiosities of the proposed UFR curve. Ton Broekhuizen (NIBC) gave a very accessible introduction to Multiple discount and forward curves. Ton started by summarizing the pre-crisis, single-curve approach and then explained clearly how to generalize it to the multi-curve framework which has been emerging as a new industry practice for the pricing of interest-rate instruments since about 2008.

Funding costs is undoubtedly another topic which has received much attention among quants recently. Bert-Jan Nauta (Double Effect) addressed this in his presentation The Funding Value Adjustment – real or imaginary? Bert-Jan expressed his opinion that the FVA should not be included in the valuation of derivatives. He also gave a balanced overview in his talk by presenting the pros and cons of FVA and discussed the consequences of different modelling assumptions for funding costs.

Mikhail Voropaev (ING) talked about Analytical Credit VaR, presenting techniques for the fast and precise computation of credit portfolio VaR. Mikhail expressed his belief that such fast calculations and real-time loan pricing become more and more important in view of increasing regulation.

The more academic stream of the event featured two sessions, namely Ton Vorst (VU, Tinbergen, ABN AMRO) on Risk and Returns in Credits and Michael Schröder on Mechanisms for no-arbitrage term-structure modelling, with applications to interest-rates and realized variance. Both sessions were very popular with participants, attracting over 40 registrations each. Ton Vorst discussed the mathematical modelling behind the rating of CDOs, emphasizing the mechanism of credit quality and rating deterioration in individual CDO tranches. In his talk, Michael Schröder presented recently obtained research results on the construction of no-arbitrage term structures. His proposed methodology complies with stylized facts such as mean-reversion and positivity, and the rates thus constructed keep their tractability.

Following the by now well-established practice of TopQuants events, speakers and participants were offered complimentary drinks and a “walking dinner” after the parallel sessions and could continue their discussions in an informal setting. Several workshop participants have commented positively on this opportunity to meet in an informal setting with colleagues from other institutions and exchange ideas. One of the workshop participants commented: “In London, you can attend something like this almost every week. But in the Netherlands, the events organized by TopQuants are really unique!”

TopQuants acknowledge the generous sponsoring for this workshop received from Ernst & Young.

Everyone registered for this event will receive an electronic questionnaire. TopQuants will take the comments and feedback into account in the organization of future events. At the event, TopQuants have also announced plans to start a bi-annual newsletter. Watch the TopQuants webpage for more information about our activities in 2013!

TopQuants – the networking organization by quants for quants based in the Netherlands – is organising another workshop on:

Current topics in modelling

The workshop will take place on Wednesday 21 November, with registration starting from 15:30, and sessions lasting until approximately 18:00. After this there will be walking dinner and drinks, and the doors will close at around 21:00. It will be held at the Ernst & Young headquarters in Amsterdam (Antonio Vivaldistraat 150, 1083 HP Amsterdam), which is at walking distance from the train/metro stations Amsterdam RAI and Amsterdam Zuid.

Following the pre-announcement distributed earlier, this constitutes the official invitation to participate.

The format will be similar to that of the TopQuants Autumn workshop held in 2011, i.e. there will be two slots each offering several parallel sessions. You will have the opportunity to attend one parallel session in each slot. You will find an overview of the sessions offered here. Your preference for these sessions should be indicated in your registration form. We will accommodate your preferences on a “first come first served” basis. Experience shows that popular sessions are booked out fast. So please register now in order to get into the session you are most interested in.

Please complete this registration form before November 10, 2012 to register your participation and to let us know your preferences for the sessions. A confirmation will be sent soon after the registration has closed.

TopQuants Autumn Workshop 2012 – Why should I attend?

Are you interested in technical quant topics? Would you like to know more about what regulation does and how it will impact the work of quants in the Netherlands? Are you curious to hear how quantitative topics are viewed by quants at other banks, financial institutions or academia? Do you appreciate networking opportunities?

The TopQuants Autumn Workshop aims to provide you with just this! It will offer two rounds of parallel sessions. Each parallel session will last for just under an hour.

At the start of each session, speakers will provide a brief introduction before going into more technical details. The presentations will be followed by a discussion between all session participants, including the speaker(s). To facilitate the discussion, sessions will be attended by a session host.

To conclude the event, there will as usual be complimentary drinks and walking dinner with plenty of networking opportunities for all participants. We are very grateful that Ernst & Young has once again agreed to host a TopQuants event after the interactive symposium that was held there back in 2011, and are sure that their headquarters will provide a stimulating and interactive setting for all participants.

So please do not delay, but register today! Feel free to forward this invitation to colleagues who you believe might be interested in attending the event, but are not necessarily yet on our mailing list.

We hope to see you soon.

Kind regards,
The TopQuants Team

November 21, 2012
Save the date and call for contributions

TopQuants – the networking organization by quants for quants based in the Netherlands – is organizing a workshop on

Current topics in modelling

The workshop will take place on Wednesday 21 November at 3.30 pm. It will be held at the EY office in Amsterdam. Please save this date in your calendars! The official invitation will follow in due course, so watch your Inbox and/or the TopQuants homepage.

Below we will provide you with some information on the content and format of this TopQuants event and ask you for input, suggestions, and contributions.

TopQuants Autumn Workshop 2012 – Why should I attend?

The TopQuants Autumn Workshop aims to provide you with lively interaction on technical quant topics. It will offer two rounds of parallel sessions. There will be about five to six parallel sessions in each round. Each parallel session will last for an hour. During a session there will be room for 20-25 participants. At the start of each session, speakers are encouraged to provide a brief introduction before going into more technical details. The presentations will be followed by a discussion between all session participants, including the speaker(s). To facilitate the discussion, sessions will typically be attended by a session host.

And of course, to conclude the event, there will the usual complimentary drinks and walking dinner with plenty of networking opportunities for all participants.

You will have the opportunity to attend two parallel sessions. Whether you pick a topic you are actively working on – or one you have always wanted to get an overview of – there should be something in it for everyone. And you even have a say in what topics we offer…

TopQuants Autumn Workshop 2012 – Call for Contributions

The topics of the parallel sessions have not been finalized yet and we invite you to contribute to making this workshop a success! Would you like to give a presentation on an a particular topic you consider relevant or are you interested in hosting a parallel session, please do not delay but contact us today.

You can reach us via TopQuants. The deadline for submitting a proposal for contribution is September 15, 2012. The program will be finalised by October 15, 2012.

Kind regards from the TopQuants team

While his current research interests are around insurance and the related risks, Antoon is actually more known by many quants working in the Netherlands for his work on interest rate modelling. Well aware of the interests of his audience, Antoon did not only address what he called “the two worlds”, namely “the insurance world” and the “banking world”, but also managed to sketch an integral view on these in his very instructive presentation.

To illustrate the two worlds he loosely described the “banking world” as one which earns a living from trade margins but then strives to hedge away all risk. He contrasted this with the “insurance world” in which – partially unhedgeable – risks are deliberately taken in order to generate profits. Drawing on his ample professional experience in both the banking as well as the insurance industries, Antoon was able to spice up his talk with various real-life stories.

Being a true quant, Antoon did of course not content himself with telling anecdotes about traders and actuaries. Instead, he took seriously the uncertainty we face even in pricing seemingly simple positions and developed valuation methodologies taking into account model ambiguity. To show his methodological framework at work, Antoon provided several illustrative examples, like the pricing of very long-dated cash flows and the pricing of unhedgeable Equity risk.

Antoon’s keynote was received very well by the audience and the panel alike. The latter consisted, besides Antoon himself, of Philippos Papadopoulos (Head Economic Capital Modelling at RBS), Bruno de Cleen (Head Integrated Capital and Portfolio Management and Modelling at Rabobank), Theo Kocken (CEO Cardano Group and Prof. Risk Management at VU Amsterdam), and Fabrice Schelback (Global Head of Developed Markets Structuring and FO Quants at ING Bank).
The panel agreed that Antoon’s research, while still in a nascent phase, highlighted several aspects of model ambiguity of enormous practical importance in the present situation of the financial industry and indeed of the economy as a whole. Several panel members mentioned in particular its relevance in the light of the current discussion of pensions in the Netherlands.

To enliven the discussion, the TopQuants organizers had decided to confront the panel members with a number of – more or less controversial – statements. They were then asked to express their agreement (or disagreement) by raising a corresponding “Yes” or “No” sign. This lead to a lively discussion – gently but professionally hosted by TopQuant Martin van Buren – not only on the panel, but also involving several participants from the audience.

As usual for a TopQuants event, all panel members and participants were offered complimentary drinks and snacks and could continue their discussions in an informal setting.

TopQuants acknowledges the generous sponsoring for this event received from ING bank.

Everyone registered for this event has received an electronic questionnaire. TopQuants will take the comments and feedback into account in the organization of future events. Watch the TopQuants webpage for more information about our activities in the remainder of 2012, to be released in due course!

The presentation by Antoon Pelsser you can find here. Antoon also published a paper on the subject.