QF Events

Center for Quantitative Finance Hosts Evening for Stony Brook Wall Street Alums

The Center for Quantitative Finance and the Advancement office organized a panel discussion for Stony Brook alumni on December 3rd at the conference center in JPMorgan Chase’s Manhattan headquarters.  Our thanks go to JPMorgan Managing Directors John Quirk, a Stony Brook alum, and Bob Caporale for providing the beautiful venue and lavish post-discussion refreshments.

After a warm introduction by Dean Yacov Shamash, moderator Prof. Ann Tucker led a lively and thought provoking discussion with panelists Prof. Robert Frey, Prof. Andrew Mullhaupt, and Andrew Lapkin about risk management, systematic trading, and setting standards for mathematical modeling in finance.

Risk Management:  Panelists agreed that traditional risk management techniques using VaR and lognormal asset pricing models had serious flaws.  Some of these issues could be addressed by using fat-tailed distributions and by looking back farther, over 100 years, to get a realistic sense of the frequency and magnitude of catastrophic market events.  A question by an alum, Dr. Michael Driscoll, elicited an acknowledgement that all the historical data will not be much use in determining the exact nature of the next market catastrophe. This point led the panelists to talk about the challenge of building trading models that incorporate the fact that all models will fail to account for some important future uncertainties.

Systematic Trading:  Panelists agreed that systematic trading has an approach to risk management that is very different from traditional, more fundamental strategies, and there are some lessons that others should incorporate.  They all agreed that flash trading was improper, promoted unfairness, and should be banned.  Reflecting to August 2007, they discussed the merits of high-frequency trading strategies and their potential to disrupt markets.

Best Practices in Quantitative Finance:  Panelists discussed whether some formal controls and regulation were required for quantitative models.  Robert Frey referred to recent Congressional testimony of MIT’s Andrew Lo. He recommended the creation of a government panel for financial disasters, much like the National Transportation Safety Board, whose recommendations after crash investigations have produced safety regulations that have made commercial air travel incredibly safe in the U.S.  However, the panelists all emphasized that care should be taken to avoid regulations which are after-the-fact or which affect the complex and ever changing nature of investment opportunities.

Speaker Bios:  Ann Tucker, who earned her Ph.D. from Stony Brook in 2000, is currently the Executive Director of the Center for Quantitative Finance.  She spent the previous decade on Wall St. working as a quantitative trader.  Robert Frey earned his B.S. and Ph.D. from Stony Brook and was a Managing Director at Renaissance Technologies before retiring in 2005.  He then returned to the Applied Math Department to develop the graduate initiative in quantitative finance.  Andrew Mullhaupt recently retired as Director of Research for the Meridian Fund at SAC Capital and is now an adjunct Professor in Applied Math.  Andrew Lapkin is President and COO of Measurisk, a leading provider of risk management analysis for the financial industry.