gioel - What can I do with a PhD in physics? Gioel...

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Gioel Calabrese 29 March 2011 What can I do with a PhD in physics?
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Agenda + Financial risk management Economic Scenario Generator (ESG) + ESG and its main uses Real world probability distribution Risk neutral valuation + Do you need a PhD in physics? Knowledge: ODEs, PDEs, stats, etc. Skills: problem solving, communication + My recommendations 1
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+ Barrie & Hibbert helps clients understand and manage financial risk through its market-leading Economic Scenario Generator (ESG) 3
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ESG and its main uses 4
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Economic Scenario Generator (ESG) + The ESG generates scenarios for various economic variables and asset returns using Monte Carlo technique + This helps clients (insurance companies) understand and manage financial risk Q1: How much capital should be set aside to ensure solvency in 1yr with a 99% probability? Q2: What is the value of the liabilities? 5
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6 + Chart illustrates model dependency + Equations describe stochastic evolution of economic variables and financial assets + Quite a complex piece of software! Property Returns Alternative Asset Returns (eg commodities) Exchange rate (PPP or Interest rate parity) Initial swap and government nominal bonds Nominal short rate Nominal minus real is inflation expectations Credit risk model Realised Inflation and “alternative” inflation rates (i.e Medical) Real-economy; GDP and real wages
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This note was uploaded on 11/23/2011 for the course PHYSICS 7857 taught by Professor Pullin during the Spring '11 term at LSU.

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gioel - What can I do with a PhD in physics? Gioel...

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