30/11/2017

Conference at IMPA discusses mathematics applied to finance.

Problems inherent to the financial market may be very different from one country to another, but solving them invariably involves mathematics. Therefore, in recent days, researchers from world-renowned institutions met at IMPA for the international conference, which ended on Wednesday evening (29), and dealt with fundamental issues in the economic environment, such as asset price volatility, commodities and interest rates.

Held by IMPA since 2005, the Research in Options event brought approximately 100 participants to Rio de Janeiro this year, including Bruno Dupire, director of quantitative research at Bloomberg in the United States; Marco Avellaneda, from the Courant Institute of Mathematical Sciences (USA); Sebastian Jaimungal, from the University of Toronto (Canada); and Emmanuel Gobet, from the Ecole Polytechnique (France). Check out the topics of the mini-courses, presentations, and papers from the event here .

Organizer of Research in Options, which opened on Monday (27), IMPA researcher Jorge Zubelli considered this year's edition one of the most productive, due to the debates around data analysis, algorithmic trading and machine learning, topics of great relevance in the area of Quantitative Finance and Risk Analysis.

"The role of models for studying volatility in its various forms was also discussed, especially with regard to the new financial instruments that have emerged to protect against fluctuations and excessive volatility," the researcher highlighted, adding that topics on modeling were also addressed to better understand the dynamics of commodity prices and interest rates.

In one of the presentations, on negative interest rates, Professor Matheus Grasselli, from McMaster University (Canada), anticipated a scenario that still seems inconceivable, but the day when it will become reality is not far off: a world where banknotes will be obsolete. He noted that the United Kingdom is already studying the possibility of creating a digital currency issued by the government.

Using a mathematical model, he showed that setting negative interest rates as a way to stimulate the economy, as is the case in Denmark, Sweden, and Switzerland, is effective. However, since banks can charge for holding the account holder's money in such situations, one proposal is the use of Central Bank Digital Currency, an electronic currency issued by the government.

“Holding money in savings or leaving it under the mattress doesn't cause economic recovery. The alternative to cash is electronic money. It will be controversial because many believe that money is a real, physical thing,” he noted.

Machine learning

Another topic directly linked to technological changes in the economic field was addressed by Bruno Dupire, Director of Quantitative Research at Bloomberg in New York. He analyzed the use of machine learning as an investment strategy in the financial market. The term may seem strange at first glance, but it is part of our daily lives, whether in Google's search engine, the movies Netflix suggests, or the list of books Amazon sends to our mailbox.

According to Zubelli, the event confirmed the fundamental role of mathematics in understanding the financial market and risk management. "This understanding increasingly requires a sophistication of mathematics. This places IMPA in a prominent position at all levels, including teaching, research, and innovation," he said.

During his presentation on modeling asset price volatility in financial markets, at the closing of Research in Options, Zubelli highlighted that, in the last ten years, the Laboratory for Mathematical Analysis and Modeling in Applied Sciences (LAMCA) at IMPA has carried out seven industrial projects, taught mini-courses, registered two software programs, and produced high-level research through 13 post-doctoral fellowships, 22 master's theses, and 5 doctoral dissertations.