Second Financial Mathematics Festival 25 — 26 February 2000 Dirac Science Library, 4th Floor Department of Mathematics The Florida State University

Friday, 25 February 2000

      3:30 p.m., Dirac Science Library, 4th Floor

Larry R. Abele, Deutsche Asset Management

How Indexing Affects Active Portfolio Management

A revolution is taking place in money management with the creation of index funds and the benchmarking of active managers. I will look at the implications to the industry and speculate that manager skill (the ability to add value to a benchmark) will become a traded derivative.

      4:00 p.m., Dirac Science Library, 4th Floor

Reception

      4:30 p.m., Dirac Science Library, 4th Floor

Robert F. Almgren, University of Chicago

Modeling Liquidity Risk

In carrying out a large portfolio transaction, a trader must balance the liquidity premium he must pay to trade rapidly, against the uncertainty of future prices to which he is exposed by trading slowly. Using a simple model for how trading moves prices, and using a simple utility function formulation for balancing risk against known costs, we apply the calculus of variations to determine an optimal trading strategy in terms of a few market parameters. We argue that these solutions are a realistic mathematical formulation of traders' intuition about optimal trading. We examine actual US stock market data to estimate the parameters in our model, and show that the time scales characterizing optimal liquidation strategies vary by several orders of magnitude across the market. Copies of the working paper are available on our Web page at http://finmath.uchicago.edu/~almgren/optliq/

Saturday, 26 February 2000      

Scott Mixon, Warburg Dillon Read

Quantitative Jobs in Finance

Advice to job searchers from a relatively recent job searcher. The discussion covers the various types of jobs available and strategies for learning about job opportunities in the private sector. Emphasis is placed on details that quantitative job searchers often overlook.

Panel Discussion:

Jobs!

(Abele, Almgren, Mixon)

Cooperating Departments are: Economics, Finance, Mathematics, Risk Management and Statistics.

Graduate study in Financial Mathematics and a listing of the faculty is described in the Guide to Financial Mathematics at Florida State University

The Steering Committee is composed of Professors Paul Beaumont, Bettye Anne Case (Chair), David Kopriva, Ian McKeague, Don Nast and Craig Nolder.