TopQuants Newsletter – Volume 2 – Issue 2

The TopQuants team presents the second issue of our 2014 newsletter series. We continue to hear positive opinions from the Quant community on the newsletter articles and also see the increased readership which is quite encouraging. We cordially invite you all to contact us with your ideas and submissions which can include technical articles, blogs, surveys, book/article reviews, opinions (e.g. on newly proposed regulations), coverage of interesting events, research results from Masters/PhD work, job internships etc. The newsletter will continue to cover all the regular TopQuants events (autumn/spring workshops) and the new initiatives taken. Particularly worth highlighting at this point is the “Quant Careers Minisymposium” event that will take place later this month, at which event we will announce the winner of the “Best Quant Finance Thesis Award” competition for Masters students in The Netherlands, which is jointly conducted by EY and Vrije Universiteit Amsterdam, Quantitative Finance group, Quants@VU in cooperation with the TopQuants association. Please read this article for more information on that event.

This issue starts with a coverage of the TopQuants spring event conducted in May 2014 and hosted by De Nederlandsche Bank (DNB). It contains a brief summary of the talks by the keynote speakers, Patty Duijm (Economist, Financial Stability Division, DNB), Marije Elkenbracht-Huizing (Head of Market Risk, ABN AMRO), and Cars Hommes (Professor, Economic Dynamics, University of Amsterdam). It also includes the lively panel discussion that was conducted by TopQuants members, Marieke van der Klip, Martin van Buren, and Diederik Fokkema as discussion facilitator.

This issue also features four articles contributed by people from academia and industry. The first article is by Steffen Pang who is a Financial Risk Management Consultant at the firm Zanders. It talks about the well known longevity risk that impacts the life insurance companies and the employment of longevity swaps as an effective hedging instrument and for value creation in these companies. The second article is by Tim Neijs who is an Associate Consultant at Zanders. It describes the concept of “Funds Transfer Pricing” and provides some interesting insights about how FTP system design choices affect the risk transfer between bank departments and ex-post profit allocations.
The next article is a short paper contributed by Rogier Swierstra who currently works as an Economic Capital Modeler at the Royal Bank of Scotland in Amsterdam. The article delves into the concepts of Investment theory and provides an interesting perspective on one of the commonly accepted norms that, “taking risk is rewarded” and highlights the misconceptions associated with that statement.

The final article presents the case study of the winning team from the fifteenth edition of the Econometrics Game Event that is organized annually by the study association for Actuarial Science, Econometrics & Operational Research (VSAE) at the University of Amsterdam. The case study of the winning team from the previous Econometrics Game Event (held in 2013) was included in the September 2013 edition of the TopQuants newsletter and has been well appreciated by the VSAE organization. The 2014 case study objective was to predict poverty statistics in an efficient manner by using variables that are relatively easier and less expensive to collect. The final winners are from the University of Copenhagen and they include Valeria Zhavoronkina, Anders Munk-Nielsen, Daniel Safai and Alessandro Martinello. Their article focuses on predicting poverty using incomplete data by adopting a pseudo-copula based approach.

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

Aneesh Venkatraman and Gilles Verbockhaven