How I did not meet Chris Sims

When I was in Princeton giving a talk earlier this year I was told by my colleagues at ORFE that I should try to meet Chris Sims, because he was probably the best person in their Economics department to give me advice and feedback on my quest to mathematize the Minsky model for financial instability. My friends also mentioned that Chris was a perennial top contender for the Nobel prize.

Since I have always been clueless about my relative importance in the world, I promptly e-mail him asking if he would be available to meet (I also wrote a similar message to Paul Krugman - more evidence of how clueless I really am). Much to my surprise, Sims e-mailed me back the next morning suggesting a time and place for us to meet.

Alas, inexplicably my mail server was down that day and I only received the message several hours after the suggested time, together with a second message from Chris saying that it looked like "we did not make a connection".

I remember thinking to myself that day that if he was ever awarded the Nobel prize I would curse the McMaster mail server forever for robbing me the opportunity to meet him !

Thank God for Thanksgiving

Apologies to the regular reader(s) who noticed the radio silence of the past few months. It turns out that coming back from a sabbatical is harder work than I thought ! But don't despair: I'll use the Thanksgiving long weekend to post about the following:

- the first meeting of the editorial board for a new series of books by Springer dedicated to quantitative finance;

- a very informative workshop on commodities and energy finance at IMPA (Rio de Janeiro) in August;

- a really nice conference in South Africa at the end of August;

- the start of a new season for the Fields Institute Quantitative Finance Seminar Series in September;

- a short and enjoyable workshop on optimization and risk management at Fields in October.

Stay tuned !

Understanding financial crises

At least that is the ambitious title of a project I'll be working on during the summer in connection with the Fields - Mitacs Undergraduate Research Program.

The immediate goal is simple: compile as much as possible of the dataset used in the book This time is different and extend it to include recent data up to 2011. Along the way we plan to gain a better understanding of the salient statistical features of financial crises and do our own analysis of the reliability of several early warning indicators proposed in the literature.

The fun part is that we could witness the mother of all crises right in the middle of the project if the US default on its debt.

Update: here is the video of the final presentation for the project delivered by the students.

California dreamin'

Ok, not so much dreaming as attending a very nice conference at USC earlier this week. The WCMFs started as a mainly local affair in 2007 in Stanford, but has grown steadily to become a recognizable event in the international scene.

For me the highlight of the conference was the opening talk by George Papanicolaou, who spoke about an elegant mean field approach to systemic risk. It was the first time I met him in person, and I was impressed by his extensive knowledge of economics, including some relatively obscure references that are not in the radar screen of most mathematicians.

Unfortunately I had to leave sunny California before the BSDE feast even started, but I'm sure it was equally enjoyable.

Macroeconomics in Santa Barbara

I'm visiting UCSB this week and talking about an agent-based model for the interbank market.

Apart from the excellent weather and general friendly atmosphere in town, I had the extra treat to share an office with Bernt Oksendal, who is also visiting and gave a talk yesterday. Curiously enough, Bernt was only the second most famous Norwegian in the room. I was slightly disappointed, but generally relieved (given the remarks I made about modern macroeconomic theory) by the fact that the most famous one didn't attend my talk today.

IJTAF - Foundations of Mathematical Finance

I just received a copy of the special issue of the International Journal of Theoretical and Applied Finance dedicated to our workshop on Foundations of Mathematical Finance, for which yours truly served as a guest editor together with Marco Frittelli.

The special issue on Computational Finance is already completed and should go into production soon. The third and final special issue that IJTAF agreed to publish in connection with the thematic program, on Derivative and Risk Management, will appear early next year.

Quantitative Finance Seminars - Season Finale

The last two talks in Quantitative Finance Seminar series for this academic year took place last Wednesday at the Fields Institute.

The first speaker with Xunyu Zhou (Oxford), who has been playing a key role in the field of behavioural finance in recent years. Specifically, while behavioural economists are busy finding and cataloguing all sorts of less than rational traits, XYZ (as he is affectively known) set himself the task of exploring the consequences of things like S-shaped utility functions and probability distortions in concrete problems in finance. Most importantly, he has devised methods for actually solving these non-standard optimization problems (most notably the quantile method), thereby turning what economists see as ugly pathologies into beautiful mathematics.

In the second talk, Patrick Cheridito (Princeton) proposed and analyzed a very general framework based on affine process where equity and credit risk problems can be treated in a unified manner, a hot topic that was central to one of the workshops held in our thematic program last year.

The seminar series will return in September for another year of high caliber talks. Stay tuned.