A Stylized History of Quantitative Finance – Emanuel Derman comes home

The African Institute of Financial Markets and Risk Management (AIFMRM) at the University of Cape Town (UCT) hosted a Special Seminar in October with Professor Emanuel Derman from Columbia University. Students attending the seminar had the rare opportunity to engage with the South African-born academic, UCT graduate, quant and author during a talk entitled A Stylized History of Quantitative Finance.

The seminar focussed on the historical progress of Quantitative Finance and how the industry has developed in terms of quantifying the concepts of diffusion, risk, volatility, diversification, hedging, replication and arbitrage; and their impact on valuing financial securities.

Professor David Taylor, Director of AIFMRM, said it was an honour for the institute to host someone with such a distinguished profile. “The combination of his academic and applied contributions to Quantitative Finance and his years of senior practical experience is rare. Emanuel’s visit is a clear signal to our students and the wider community that we have an international profile in Quantitative Finance at UCT. Also, he’s a UCT alumnus, which made this a sort of homecoming for him.”

Students at the event said it was the best seminar they had attended this year. “I think this is because Emanuel now gives seminars where he demonstrates the evolution of Quant Finance over the past four decades and, consequently, has many personal anecdotes to share. He has also become rather philosophical about the subject area and profession, which lends an unusual slant to his talks. However, because he teaches on the Financial Engineering programme at Columbia University, he still has access to the latest trends in research and practice”, said Taylor.

Prof Derman obtained a BSc Honours from UCT, followed by a PhD in Theoretical Physics from Columbia in 1973. He joined Goldman Sachs’ Fixed Income division in the 1980’s where he was one of the co-developers of the Black–Derman–Toy interest-rate model and the Derman-Kani stochastic volatility model. He is the author of numerous technical papers in Quantitative Finance primarily on the topics of Volatility and Financial Modelling.

He was named the IAFE/SunGard Financial Engineer of the Year in 2000 and was elected to the Risk Hall of Fame in 2002. Well-known as a professional Quantitative Analyst, Derman is also the author of the book My Life as a Quant: Reflections on Physics and Finance, which was one of Business Week’s top ten books in 2004.

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