UCT’s top financial mathematics students take on a global challenge

Now in its fifth year, the Financial Mathematics Team Challenge (FMTC) has once again combined the talents of students and industry practitioners to find unique solutions to a selection of the finance industry’s most pressing problems.

Held in Cape Town from the 29th of June to the 7th of July, the FMTC saw four teams compete for the coveted trophy by providing the best solution to an industry-relevant problem. Teams comprised of Master’s and PhD students from leading global institutions such as University College London (UCL), Oxford University, ETH Zurich and UCT were given seven days to work on their solutions, followed by two days of presentations, before the winners were chosen.

The winning team – which included two Master’s in Mathematical Finance students from UCT – worked on a problem posed by StepStone, a private markets firm in Zurich. The team members used the language and mathematical techniques from public markets to solve an optimal investment timing problem from illiquid private markets. The solution provides an initial step towards estimating the correct sequence and time for staged investment.

“FMTC brings international researchers to Cape Town to give them a glimpse of the dynamic environment that is developing at UCT in the African Institute of Financial Markets and Risk Management,” says Professor David Taylor, Director of AIFMRM in the Faculty of Commerce at UCT.

Co-founder of the FMTC, Dr Andrea Macrina – Director of the Financial Mathematics Programme at UCL, believes collaborative research strengthens the scientific community, promotes peer-learning and yields creative and unexpected solutions. “If industry can’t figure out the solution, then students look for improved answers that are mathematically robust,” says Dr Macrina. The intense challenge produces work that is similar in scope and complexity to that of a Master’s dissertation. This year’s teams worked on topics in portfolio optimisation, interest rate modelling, hedging long-term risk and private equity.

Dr Lisa Powers, Vice President of Research at StepStone, who served as co-mentor for the challenge, said that the winning team produced incredibly consistent work in a short time. “From building two calibrations in two days, to the depth and clarity of their 51-page report, they did amazing work and managed to beat some really strong competition,” she says.

Dr Powers believes the FMTC has enormous practical value in preparing students for the working world. “Working with people, whom you may not know, to solve a complex problem and then communicating your findings in writing is similar to a business development cycle that I see daily in my work,” she says.

Co-mentor, Martin Larsson, Assistant Professor in the Department of Mathematics at ETH Zurich, says, “I think our team won due to their strong individual skillsets and their willingness to work as a team. They demonstrated that the whole can truly be greater than the sum of its parts.”

Johannes Wiesel, a PhD student at Oxford, agrees that strong teamwork is a winning formula. As team leader, he says, “There were interesting group dynamics. Some people were good at programming, others at theory, and I hope that I managed to exploit their strengths in a positive way so that everyone could contribute at a high level.”

Two UCT Master’s students on the winning team, Cole van Jaarsveldt and Bandile Mbele, found the challenge tough but hugely rewarding. “As UCT students we represented our university and I believe that we were exemplary ambassadors,” says van Jaarsveldt. He adds, “FMTC introduced me to the world of private equity that I now have a passion for and plan on researching in the future.” The challenge has inspired him to apply for a PhD at Oxford.

Mbele says the challenge was way beyond anything he had been exposed to at undergraduate or Master’s level, but he highly recommends it to other students. “Without this challenge I would never have seen how private equity firms actually work, and understood the dynamics involved through analysing real-life data.” Mbele feels the challenge has opened his eyes to postgraduate opportunities in research and has built valuable networks for the future.

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