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Chen Follows Path to California

The next stop for Tao Chen (MMF ’12, Ph.D. AMAT ’16) is the sunny campus of the University of California, Santa Barbara, where the weather averages 65 to 75 degrees year-round. UC-Santa Barbara is perched on the cliffs above the Pacific Ocean, and it even features its own beach. Chen will be a visiting assistant professor there, carrying out research in stochastic analysis with applications to mathematical finance, and teaching probability, stochastics, or math finance.

Despite the fact that his weather is about to get a lot better, Chen admits it will be hard to leave Chicago. “I’ve been here for seven years,” Chen noted. “Besides my hometown, Nanjing, this is the city where I’ve lived the longest.” But the future awaits.

Chen had earned a B.S. in applied mathematics from Southeast University in Jiangsu and an M.S. in applied mathematics from Nanjing University when he decided to come to the United States for the Master of Mathematical Finance (MMF) program at Illinois Tech. This well-ranked program provides advanced education in theoretical, computational, and business aspects of quantitative methodologies relevant to the financial industry.

“It is a high-quality program,” Chen said. “IIT has a good location; Chicago is a financial center. There are strong professors from academia and industry, like Professor Bielecki and Professor Cialenco. Students may get internships or jobs through faculty.” Chen was a quantitative risk research intern on the Risk Management Team of CME Group, working with their clearinghouse team. Clearinghouses offer transparency for derivatives trading and have become increasingly important since the financial meltdown of 2008.

Chen advises MMF students, “Do well in class, which improves your chances of getting internships and jobs. It’s very important to have good programming skills; I think it’s the most important thing for finding a job. Try to practice your English; make some local friends.”

After completing his MMF and internship in 2012, Chen had the opportunity to pursue his doctoral degree in applied mathematics at Illinois Tech. He agreed in part because he likes research. “As I did more and more research, I liked it more and more,” Chen said.

Chen has pursued three different lines of research, under the supervision of Tomasz R. Bielecki, professor of applied mathematics and director of the MMF program, and Igor Cialenco, associate professor of applied mathematics, director of graduate studies, and co-director of the MMF program. The first is captured in Chen’s thesis, “Dynamic Conic Finance via Backward Stochastic Difference Equations and Recursive Construction of Confidence Regions,” the first part of which was published in the SIAM Journal on Financial Mathematics. Explained Chen, “I combined dynamic performance and risk measures together with something called backwards stochastic difference equations for pricing and hedging financial securities.”

The second area, “Recursive Construction of Confidence Regions,” also part of Chen’s thesis, is related to statistics. “We were trying to find a recursive construction of confidence regions. We are the first ones in the world to do it,” said Chen. This has important applications in the field of stochastic optimal control.

The third area involves stochastic optimal control, covered in a forthcoming paper, “Adaptive Robust Control Under Model Uncertainty.” “It’s about solving optimization problems, when the underlying models are not known” said Chen. “We are proposing a new methodology, the adaptive robust control method, that addresses several drawbacks of the existing methods.”

As a doctoral student, Chen was a teaching assistant, a research assistant, and a member and treasurer of the IIT SIAM chapter.

“I think the most important thing is to work as hard as you can,” Chen advised Ph.D. students. “Try to do different things. Don’t just concentrate on one thing in research. If you want to find a job in academia, go to many conferences, and meet many people.”

After completing his Ph.D. in summer 2016, Chen spent a year at Illinois Tech as a visiting associate professor, teaching Math 252, Introduction to Differential Equations, and Math 333, Matrix Algebra and Complex Variables. Now, it’s off to California – which Chen has not yet seen in person.

“It was our great pleasure and privilege to have Tao as a Ph.D. student,” said Cialenco. “He has been prolific and genuinely creative in his research. We worked with Tao on three quite different research areas, being able to create what we believe are new research directions in optimal control under model ambiguity. We are happy that Tao will continue his academic career by joining a world-class research group in mathematical finance at UCSB.”