Teams of Financial Mathematics researchers from as far afield as Australia, England and Denmark arrived in Cape Town on the 2nd of July for an intensive academic collaboration. The programme, dubbed The Factory, is unique in its aim to produce academic papers of a standard that can be submitted for publication in leading peer-reviewed scientific journals within just ten days.
“This is the only time a programme like this has been attempted, and as far as I know, there is nothing else quite like this elsewhere,” says Dr Andrea Macrina, Reader in Mathematics and Director of the Financial Mathematics Programme at University College London (UCL) and Adjunct Associate Professor in AIFMRM at UCT.
The Factory is the creation of Dr Macrina and Professor David Taylor, Director of the African Institute of Financial Markets and Risk Management in the Faculty of Commerce at UCT. “This initiative furthers AIFMRM’s aims of deepening skills capabilities in the financial industry, driving research and developing the next generation of African academics in the field,” says Professor Taylor.
Six months ago, The Factory began assembling, and supporting teams of international researchers combine their expertise and experience in collaborative academic research. Teams worked via email and Skype and then arrived at The Factory to tackle the complex outstanding issues requiring many hours on end in front of a whiteboard. The goal was to complete a draft of their papers in just ten days – a difficult task which would usually stretch over months.
The two Factory teams included a mix of international and local academics. “We combined researchers across different stages of their careers – from PhD students to those with five years of experience, to some with ten or more years in an established research career – to facilitate skills transfer through collaboration,” says Dr Macrina.
An essential element is that both teams included at least one young South African researcher to expose local scientists to condensed, academic and industry-specific research in a hands-on environment.
The Factory brought in an expert reviewer, Dr Marc Henrard, to help both teams improve the quality of their work and increase their chances of publication. Dr Henrard is Head of Quantitative Research at OpenGamma and a visiting professor at UCL. He regularly publishes work in international journals and is a frequent speaker at academic and practitioner conferences. He provided two rounds of scrutiny and feedback to the teams.
Professor Henrard’s research focuses on interest rate modelling, risk management and market infrastructure, which is within the scope of both papers being written at The Factory. He says, “What is important about this initiative is that The Factory teams are answering questions that practitioners in the field would really like answers to.”
“Factory participants posed the right questions – taking a particular problem in the market and thoroughly examining the fundamentals that no-one has taken the time to do properly. This dedicated research will give the industry the building blocks to work on, for example, when it comes to setting the interest rate for mortgages,” says Dr Henrard.
Dr Henrard commended the work that AIFMRM is doing to boost local research capacity and answer tough questions. “I am impressed by all the activity at AIFMRM – the number of challenges, research projects, grants and a great deal of collaboration, which is extremely positive. The institute is engaging in real-world problems and coming up with good ideas and solutions,” he says.
While in South Africa, local industry was keen on the opportunity to gain from Dr Henrard’s expertise. He presented a masterclass for market traders, risk managers and quantitative analysts at ABSA in Johannesburg, examining the challenges seen in Europe and the US and the implications for the South African market.