Automated trading and the doctoral work of former Zurich Stock Exchange CEO

Earlier, I mentioned that former Zurich Stock Exchange CEO Dr Richard Meier (pictured) had given an excellent presentation at the 2008 Zurich SFI Doctoral Dinner about the development of automated trading.

Dr Meier described his research as a finance doctoral student in the 1960s, a period when the finance industry began in earnest to harness computers in financial trading. As a doctoral student, Meier found himself writing an important report about the feasibility of automated trading.

His research was revealing that a key challenge for the development of automated trading was the cumbersome interface between man and machine. "The automated trading technologies seen later, in the 1980s, were the product of a lengthy period of development in the field of man-machine interaction," he said.

Globalization has also shaped the evolution of automated trading. As financial trading became more global, connecting traders at a global level came to be more important than sustaining the extremely high level of interconnectivity between traders at a local level, explained Meier.

"Automation became a necessity in this context, so globalization has really helped the development of automated trading", he said.

The next event on the SFI Doctoral calendar is the Swiss Doctoral Workshop in Finance, Study Centre Gerzensee, June 2-3 2008.

Institute-affiliated ETH Professor says response to banking crisis must apply across entire industry

ETH Professor Didier Sornette, a member of the Swiss Finance Institute, is interviewed in a recent news report (AFP) about the credit crisis and warns that actions to address such issues as subprime banking losses would necessitate wide-spread involvement of the international banking community.

"You can't blame Credit Suisse or UBS [only]... because they were playing the same game as the rest of the sector", he explained in the AFP interview published on April 26th.

These sentiments are echoed by Financial Times journalist Dr Haig Simonian in a news item on Swiss banking regulation published earlier last month. Swiss Federal Banking Commissioner Daniel Zuberbühler believes that the priority should be for regulators around the world to collectively learn lessons from the crisis.

Professor Sornette became a member of the Swiss Finance Institute following an agreement made last year between the Swiss Finance Institute and the Swiss Federal Institute of Technology (ETH), Zurich. His research focuses on the prediction of crises in complex systems.

2008 wealth and tax planning Retreat begins

Top finance experts from throughout Europe and beyond assembled this morning for the first day of the Swiss Finance Institute's International Wealth and Tax Planning Retreat in Lucerne, central Switzerland.

Participants in the 5 day residential seminar came to deepen their knowledge of international taxation and exchange experiences about serving the wealth management needs of high net worth individuals.

Leading the first day of the seminar was Marc-Etienne Pache (pictured, right), Partner at Oberson Avocats in Lausanne and Geneva. In the course of an interactive discussion with fellow Oberson tax expert Fouad Sayegh, Dr Pache detailed solutions for double taxation conflicts, including an up to the minute review of international wealth taxation law.

Later this week, the Retreat will hear presentations from various wealth and tax specialists including Dr. Kurt Moosmann, an expert in advising private entrepreneurs and business owners, and tax law polymath Philip Marcovici. CEO of Zurich-based LawInContext and Partner at Baker & McKenzie, Marcovici is an active member of the American and the Canadian bar association, and of the Canadian Tax Foundation in Switzerland.

Photograph courtesy of Adrian Wipf.

Professors predict changes in approach to risk management

Finance magazine Bilan interviewed Institute director Jean-Pierre Danthine (left) and visiting professor Darrell Duffie about the changes that we can expect to see in the management of financial risks.

Danthine predicts a two way evolution in which Bankers become more familiar with quantitative aspects of risk management, and Quants become better-versed in the economics and the social context in which banking is conducted.

Duffie emphasized that Swiss Banks were not alone in having misjudged the risks that have cost the financial sector so dearly.

Attempts by risk managers to persuade their employers to scale down risk, and with that scaling down, to reduce their profits, "would obviously not have been very well appreciated", said Duffie.

Barclays Wealth, London, is the destination for recent Zurich doctoral graduate

Preferring the conceptual diversity and lateral mindset of wealth management to a traditional role in asset management, recent graduate Dr Benoit Metayer has been appointed as an associate director at Barclays Wealth in London.

Benoit (pictured), whose doctoral work was supervised by Professor Rajna Gibson in Zurich, is now working in a team of 13 Quants. 'In order to serve clients, the team develops cutting-edge methods in four major areas - risk profiling, portfolio optimisation, machine learning and the pricing of structured products,' explained Benoit.

‘From a quantitative point of view, the role is really exciting as we often have to provide sophisticated solutions in a completely bespoke way’, he said, pointing out that his employer is taking a highly scientific approach to the investment process.

‘In the current context of difficult markets, Quants bring significant value by helping private bankers and advisors to deal with clients more actively, accurately and efficiently,' he said.

Zurich Doctoral Dinner 2008

Zurich members of the Swiss Finance Institute Doctoral Program met for their annual dinner last Tuesday, April 15th.

NCCR-Finrisk managing director Eckart Jaeger was MC for the event, held at the Restaurant zum Grünen Glas in the centre of Zurich's Altstadt (old town).

As you can see from the photo gallery of the event, there was lively discussion throughout the evening and a presentation by former CEO of the Zurich Stock Exchange, Dr Richard Meier, charting the history of automated trading in Switzerland. More on that later.

Eckart congratulated recent graduate Dr Leon Stacescu for his appointment to a faculty position at the BI/Norwegian School of Management in Oslo and presented the doctoral students with their new SFI business cards (photo).

Letter by Professor Barone-Adesi in Financial Times

The Financial Times has published a letter by SFI Professor Giovanni Barone-Adesi in the April 15th edition of the paper in which he comments that the ‘current debate on the adequacy of Basel II [should pay] more attention to incentives and education rather than to more regulation’.

Barone-Adesi’s comments follow recent statements by Basel II chairman Nout Wellink that banks should adopt more ‘forward looking approaches to assessing, managing and holding adequate capital for risks’.

Echoing Baroni-Adesi’s sentiments was another letter arguing that Wellink's statement reflects a ‘continued obsession with regulatory capital to the exclusion of a focus of what really goes wrong.’

Barone-Adesi calls for an improvement in ‘risk culture’, including better education for banking directors and managers in the complex risk measures proposed by the Basel II directive.