Students in the Master of Mathematical Finance (MMF) program have developed a comprehensive methodology for risk allocation for a complex basket of trading strategies for ARB Trading Group, a Chicago-based proprietary trading company. The project continues a long tradition of MMF students collaborating with industry partners on research projects. Other notable partners have included CME Group, the world’s leading derivatives marketplace.
Igor Cialenco, associate professor of applied mathematics and co-director of the MMF program, supervised the work along with Xiyu Zhao, a quantitative researcher at ARB TG and prominent MMF alumnus. The students involved were Ziheng Guo, Yue Lyu, Tianxiang Zheng, Yijun Zhao, and Yiqing Liu.
“This was a great project, thanks to our partners from ARB, who were willing to set up the problem and give continuous feedback on the ideas students tried to pursue,” said Cialenco. After a semester of collaborative work, students recently testing their method and interpreted the results, which they presented on April 25.
“The project was quite complex, and it involved all aspects of the education we provide to our MMF students,” Cialenco added. “This included a good understating of the theoretical background and ability to develop new quantitative methods, perform a statistical analysis of the data, and implement numerically the proposed methods by creating a stand alone robust computational library, all combined with strong presentation skills. The choice of programming language for this project was Python.
“I think students did an excellent job so far, and I am looking forward to the culmination of this team effort – the final presentation,” he said.
The MMF program at Illinois Tech is a professional (non-thesis) interdisciplinary program offered jointly by the Department of Applied Mathematics in the College of Science and the Stuart School of Business. It provides individuals interested in pursuing careers in financial risk management with advanced education in theoretical, computational, and business aspects of quantitative methodologies relevant to the financial industry. MMF alumni are employed by such companies as CME Group, Citigroup, Discover Financial Services, Envestnet, Goldman Sachs, Intercontinental Exchange (ICE), JPMorgan Chase & Co., Morgan Stanley, OCC, PrivateMetrics Group, and Quantitative Risk Management, Inc. (QRM).
Cialenco’s research foci include stochastic analysis, mathematical finance, and statistical inference for stochastic PDEs. His recent publications include “A Dynamic Model of Central Counterparty Risk,” “Adaptive Robust Control Under Model Uncertainty,” “Trajectory Fitting Estimators for SPDEs Driven by Additive Noise,” and “Arbitrage-Free Pricing of Derivatives in Nonlinear Market Models.”