# Newsletter of the Bachelier Finance Society

## Volume 10, Number 4, October 2018** **

**JOB POSTINGS**

The aim of these postings is to create a forum for the dissemination of information on academic and industrial positions related to mathematical finance, across different disciplines and different geographical regions. Please submit any job advertisements you are aware of to jobads@bachelierfinance.org, preferably in plain text and sending the link to the website containing all the information. Updates and new items appear continuously at: bachelierfinance.org/forum/archives/category/jobs

**Assistant/Associate Professor**

Heriot-Watt University

Deadline: October 18, 2018

**Two Associate Professor positions**

University of Venice

Deadline: October 31, 2018

**Assistant professor**

Florida State University

Deadline: November 1, 2018

**Faculty Position(s)**

Cornell University

Deadline: November 16, 2018

**BOOKS & JOURNALS**

The Society maintains a list of books, book reviews and journals at: http://www.bachelierfinance.org/publications. Members that would like to have their books added to the website, should please let us know.

**ANNOUNCEMENTS**

- Call for SIAM Activity Group on Financial Mathematics and Engineering Early Career Prize
- Call for Editor Applications for “Mathematical Finance”
- Call for a JRFM special issue on Option Pricing

**INTERVIEW WITH FREDDY DELBAEN**

*Would you like to tell us about your youth? Where and how did you grow up?*

I grew up in an industrial region south of Antwerp. At that time the main activities were brick factories and ship construction. Many of the children started working in the brick factories when they were fourteen. Very few continued to gymnasium or advanced technical schools. My parents did not have much money but we had enough. They always supported me in my studies.

*How did you develop your interest in mathematics?*

I’ve always had an interest in mathematics, at primary school it started with the usual arithmetic and elementary geometric questions. In secondary school we had math-books that covered several years of the math training. So I read them as soon as I got them. In gymnasium my math teacher encouraged me to read more advanced books. For instance Artin’s book on Galois theory. I liked it very much since this was the first time I’d seen a proof that trisecting an angle, doubling a cube or constructing say a regular polygon with seven sides, was impossible by using ruler and compasses.

*Where did you get your PhD from and on what topic?*

I studied maths at the Free University of Brussels (in Dutch Vrije Universiteit Brussel). My master’s thesis was on Markov processes and Hunt’s theory. For my PhD I worked on mathematical economics but at the same time I was working on problems in functional analysis, mainly Banach spaces and spaces of analytic functions.

*What were the next steps in your academic career?*

After my PhD, I continued a scholarship of the Belgian National Science Foundation but very soon I became a part-time professor at the VUB.

*You have spent a large part of the last years in Asia, first in Japan, then in China and now back in Japan. What motivated these decisions and what are your experiences there?*

In 1993 I got an invitation from Tokyo University to spend three months at their Graduate School. The idea was to give a series of lectures on the mathematical theory of arbitrage. Walter Schachermayer and I had just proved the general version of the fundamental theorem of asset pricing and we were busy streamlining the ideas. My stay at Todai helped a lot for this development. In 1994 I had the occasion to visit the Academy of Sciences in Beijing. Since these visits I’ve maintained good contact with the colleagues there and this resulted in many more visits later on. Today it is a pleasure to see that many of the students who attended the lectures are now professors at top universities.

*Your very first student was Jean Bourgain, who made seminal contributions to mathematics and won the Fields Medal, among other prizes. What are your recollections from supervising him? Was it evident already then that he is special?*

From the beginning it was clear that he was an exceptional student. I was only teaching in the master’s programme (at that time called “licentie” or “licence”). But I heard from other colleagues that he was really really good. I was happy that he wanted to write his master’s thesis with me and that he would continue to write his PhD with me. I taught him some mathematics, especially functional analysis and geometry of Banach spaces. But very soon I started to learn more from him then he learned from me. It was amazing to see how in a minimum of time he could cut a problem in several pieces, putting aside what he thought was less essential and move to the central difficulty. He sees things and relations that I don’t see and where only later I understand why he is doing the proof that way.

*How did you develop an interest in mathematical finance?*

I was working on insurance problems and together with Jean Haezendonck I obtained a lot of results and developed the use of martingale theory and Markov processes in risk theory. However, I wanted to make more applications of analysis in the field. I learned that mathematical finance used a lot of partial differential equations theory, so I decided to have a look. During a conference on insurance, I asked Phelim Boyle about good references and problems. He had just heard me talking on some martingale application in insurance and he suggested to have a look at the Harrison-Kreps paper. He said I would like it. And indeed I did. They showed that non arbitrage theory and the existence of a martingale measure were the same. In their development they also used concepts from mathematical economics but I was familiar with. For me this was a starting point to start doing finance.

*You had a very fruitful collaboration with Walter Schachermayer, proving among other things the general version of the Fundamental Theorem of Asset Pricing (FTAP). Would you like to tell us where you met Walter and how you started working on the FTAP?*

Walter and I have more or less the same education. I met him during several conferences on functional analysis. Walter also had experience in insurance mathematics, in fact he worked in an insurance company for a while. Walter heard about my progress in the FTAP for continuous processes. The paper was not published yet but some hand written notes circulated. Walter had proved the FTAP for discrete countable time. One day he phoned me and told me about the results. He said that we must combine the techniques to come to a general form. A couple of weeks later we met during a finance meeting in Paris and during a morning discussion in a café nearby the Panthéon, we discussed what could be done. We were convinced that a proof would not pose a lot of difficulties. When we started to write down the details, new interesting questions came to surface and our proof became more and more difficult. Walter came to Brussels, I went to Vienna and the rest we all know.

*How did you get interested in risk measures? How were the Artzner, Delbaen, Eber and Heath papers developed?*

Artzner and Eber managed to get a collaboration with the Société Générale, a big bank in France. David Heath, a regular visitor of Strasbourg and myself (being involved in the actuarial programme there) joined the team. Dave had done work that was related and we started to develop our ideas. It was clear — using ideas from functional analysis — that a consistent approach based on quantiles alone (VaR) was impossible. But of course, my colleagues were not convinced and wanted examples and solutions to the question — what else can then be done? We had the answers around 1993 and Dave presented them at some occasions. That the paper was published only in 1999 is probably due to the fact that we wanted to keep things as simple as possible in order to attract a broad audience.

*Would you like to describe the early days of mathematical finance? How has the field evolved over the years?*

In the early days most of the efforts were concentrated on price calculation. The use of stochastic analysis transforming PDE into stochastics and vice versa occupied a central role. It inspired numerical algorithms. People from numerical analysis brought their techniques and knowledge into the field and conversely got motivated in developing newer algorithms, some of them having a counterpart in stochastics.

*Would you like to tell us about the perception of Mathematical Finance in the probability community in the early days and later?*

People from probability theory got interested in finance because of the heavy use of stochastic analysis and Markov process theory. It was no surprise that so many probabilists and statisticians used their techniques and knowledge for solving problems from finance. Many of the solutions use highly non trivial concepts such as local time, time transforms, transformation of Bessel processes and so on.

*How was the Bachelier Finance Society created? What are your impressions after serving as president of the Society?*

Motivated by for instance the success of the Bernoulli Society, some people got the idea of creating a society for mathematical finance. The research and teaching community was already a large group and the need for a new society was present. The precise minutes of the meetings and how the rules were created were the subject of many email exchanges. It is a pity that part of my email correspondence got lost but I hope that some of it can be found back by other colleagues.

*What is your opinion on the peer-review system, that is often criticized? What do you think about open access journals?*

Because of the evaluation procedures, there are too many papers. A good review system remains important. Too many journals without an efficient review system exist and this leads to many publications that at best can be classified as exercises. Young researchers must publish because otherwise they miss a promotion or even worse are not considered for a job. Open access journals are a good idea as long as they have a good referee system. Making results public can now be done on “arxiv”. But of course this is not the same as a publication where referees have said that it is interesting and that it went through a selection procedure.

*You have supervised a large number of excellent PhD students. What would be your advice to young students?*

Take a topic that you like and where you think that you can make new contributions. Maybe this is not the topic that gives the best chances for a financially rewarding career. If money is the only motivation, sooner or later you will regret the choice.

*During the recent financial crisis, mathematical finance was heavily criticized for its role in it, notably Michel Rocard (a former French Prime Minister) said that “mathematicians are responsible for crimes against humanity”. What is your opinion on this?*

One could also say that physicists are responsible for the nuclear accidents we have seen or that they are responsible for the nuclear threat that exists. Michel Rocard certainly exaggerated. Some people in industry were making models that did not make sense or were too simple. Smart people used the existing market to sell whatever could bring money. The risk was for others.

*What should financial mathematicians do differently in order to avoid another crisis?*

They should not believe in the models that are developed. Certainly, models help and are important but reality does not always follow the hypotheses of the models. Therefore one should follow an attitude based on the question “what if ?”. Every transaction involves a risk and evaluating the risks and avoiding piling up risks is essential. Financial engineers and mathematicians should be aware of the restrictions present in the models. Statistical data show what happened in the past but there is no guarantee that there is enough stationarity to make sure that the models remain relevant. Shocks occur!

*What is your opinion about the future of mathematical finance?*

There are new developments in mathematical finance. Besides the traditional topics and the refinements of them there is for instance the study of microstructure, the understanding of how prices are formed. The understanding and the dangers of computer trading will become very important and might contribute to a more stable financial market. These subjects are not easy. On the theoretical level there is a need to bring mathematical finance more in line with classical economic theory.

*The interview was conducted by Michael Kupper (U Konstanz) and Antonis Papapantoleon (NTU Athens).*

**UPCOMING CONFERENCES**

This list contains conferences related to mathematical finance that take place in the next three months. A full list is available at http://www.bachelierfinance.org/conferences Please let us know of conferences we are not aware of and include a URL for the event.

**Mathematical Finance Workshop**

October 13, 2018

Storrs CT, USA

**3rd Eastern Conference on Mathematical Finance**

October 26–28, 2018

Chicago IL, USA

**DEM Workshop in Financial Mathematics**

October 31, 2018

Verona, Italy

**The Quant Conference**

November 2, 2018

London, United Kingdom

**Swissquote Conference**

November 9, 2018

Lausanne, Switzerland

**9th Western Conference on Mathematical Finance (WCMF 9)**

November 16–17, 2018

Los Angeles CA, USA

**The Sixth Asian Quantitative Finance Conference (AQFC)**

November 17–19, 2018

Guangzhou, China

**Call for Papers: Deadline September 10, 2018**

**Research in Options RiO 2018**

November 24–28, 2018

Rio de Janeiro, Brazil

**QMF 2018**

December 11–14, 2018

Sydney, Australia

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