Students battle it out at annual Financial Mathematics Team Challenge

After ten days of intensive effort and teamwork, a UCT-strong team of postgraduate students walked away with the trophy at the 2nd annual Financial Mathematics Team Challenge (FMTC).

The event, hosted by The African Institute of Financial Markets and Risk Management (AIFMRM) in association with the University College London (UCL) saw five teams of mixed masters and doctoral students from three top global universities competing for the grand prize. The demanding challenge, which is one-of-a-kind in the southern hemisphere, is designed to hone the skills of financial mathematics students by exposing them to real-world challenges with industry relevance, and pitting them against talented peers from across the world.

“The participating international universities this year are all ranked highly. UCL and ETH Zurich, offer Financial Mathematics programmes that are ranked among the top in the world,” said David Taylor, Director of AIFMRM and one of the initiators of the challenge. “And the MPhil in Mathematical Finance at UCT was recently ranked 50th in the Eduniversal Best Masters Ranking for Financial Markets.”

Taylor said the FMTC is partially modelled on the international undergraduate competition, the MITACS Industrial Math Summer School, and was primarily created to help expose UCT students to their global peers – and vice versa.

“We wanted to bring international researchers to South Africa, and to give them a glimpse of the dynamic environment that is developing at UCT in the African Institute of Financial Markets and Risk Management. An indispensable ingredient had to be that the participating students would work in teams and be exposed to a healthy dose of fair competition,” said Taylor.

This is the second time that the challenge has been staged and Taylor said they were gratified to see that interest in the event has grown, with almost double the number of students taking part in 2015. Five teams of four students and their mentors worked for seven days on a research problem posed by academics and industrial partners in research areas including: expected shortfall and multi-currency contracts; margin optimisation for central counterparty clearing; commodity models and unspanned stochastic volatility; pricing of long-dated swaptions; and valuation of callable floating rate notes with write-down. It took a full two days for the teams to present their solutions.

Each team was mentored by academics and practitioners from France, South Africa, Switzerland, and the UK to ensure that they had the right support and to bring out the best in each participant.

“I was worried at first that I would be completely out of my depth,” admitted UCT MPhil  student Divanisha Pillay. “But I shouldn’t have worried about that because you get a lot of guidance along the way and you would be surprised by what you can contribute.”

Dr Andrea Macrina, a senior lecturer in the UCL Department of Mathematics, who alongside his colleague Taylor established the FMTC in 2014, said that for many of the international students who choose to make the trip during their own MSc project time, it is a big investment both in terms of time and money – as the event is only part-sponsored.

“But the feedback that we get from the students who take part is that it is a good investment,” he said.  “The time pressure and opportunity to learn from others ensure that they improve their skills and gain new knowledge to help them to be more efficient with their own MSc research projects in Financial Mathematics at UCL.”

“I learned a lot from the other people on my team,” agreed Sara Svaluto-Ferro, a PhD student at ETH Zurich, who led the winning team. “Working together, cooperating, exchanging skills. I think this is the most important thing we gained from the challenge.”

Svaluto-Ferro’s winning team, comprising two students on the UCT MPhil in Mathematical Finance: Graham Ziervogel and Chris McPetrie, and one recent graduate of the programme: Melusi Mavuso, were judged to have the best solution for their problem on multivariate risk measures for margin computations.

“The ongoing concern about systemic risk since the crisis has prompted the need for risk measures at the level of sets of interconnected financial portfolios and institutions,” explained Taylor. “Two important applications are the computation of capital regulatory requirements for banks and the computation of the margins in the context of centrally cleared trading. But, with risk measures, the gap between practice and theory is wider than in any other area of finance.”

Macrina said the quality of the final presentations and reports was of a very high standard across all five teams, and that he is now looking forward to seeing the competition gain in quality, stature and popularity.

“Now we know that the students love it and that the quality of the work it produces is really high, we are already looking forward to next year,” he said. “While we don’t plan for the competition to get much bigger in terms of the number of participants, we will continue to push for the highest standards and outcomes.”

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