Birkbeck Team Advances In A Risk Management Competition
Birkbeck team advances as one of the 7 teams in the final round of the PRMIA Risk Management Competition.
Earlier this academic term, a team of graduate students from the Department of Economics, Mathematics, and Statistics took part in the London Risk Management Challenge. The competition was organised under the aegis of PRMIA, the global professional and standard-setting body for the financial risk management industry. The Birkbeck team competed against teams from leading universities and business schools, based on a realistic but complex interest rate (exotic) derivatives case, and advanced as one of the 7 teams to the final round, to take place on 24th February 2017. Previous winners of the London Regional Risk Management Challenge included Frankfurt School of Finance & Management and Imperial College Business School.
"Birkbeck's Department of Economics, Mathematics, and Statistics is known, both in academic and industry circles, for the rigour of its programmes, said Charles Shaw, studying MSc Financial Risk Management. “This particular competition allows students to put their knowledge to the test whilst competing against the best graduate-level quant teams in the world. It also allows students who want to engage in creative thinking to delve deeper into exciting financial mathematics and to apply modern statistical modelling tools to problems in risk and finance."
Team members Mayundo Mwenze, Charles Shaw & Tim Poon
Economic developments and some high profile failures of risk management in recent years have reminded boards of the need to ensure that a company’s approach to risk has been properly considered in company strategy. The competition allowed Birkbeck students the opportunity to study a company’s industry, risk position, financing capacity, targeted financial statistics, and long term goals. As part of this process, the team calibrated and simulated term structure models in MATLAB using Markov Chain Monte Carlo methods to advise on corporate debt refinancing. The Birkbeck team successfully created a thorough and detailed risk methodology to provide financial market participants with accurate risk measures to improve their bottom line.
Disputes between banks and public authorities over interest rate swaps are not new. English, Italian, Norwegian, and German public authorities are among those that have come before the English courts, with variable success, to argue that they are not bound by swaps that have turned out to be expensive. The growth of derivatives activities undeniably poses challenges to financial institutions, end-users and regulators. However, as the industry landscape moves forward, we must not lose sign of the fact that derivatives are important instruments to hedge risk and, subject to appropriate risk management, can be very useful.
The team's recommendations and supporting remarks aimed to bring together elements of best practice for risk management; prompt others to consider how to discharge their ethical responsibilities in relation to the existing and emerging risks faced by the company; reflect sound business practice, whereby risk management and internal control are embedded in the business process by which a company pursues its objectives; and highlight related reporting responsibilities. Although the case study examined a particular situation in Portugal, lessons learned can be applied to a number of state-owned European entities.
The team would like to say a special thank you to the School of BEI and the Students' Union for funding the team this year, to the Birkbeck Economics + Finance Society for facilitating the entry and composition of the team, and to Konstantinos Dagklis for mentoring throughout the competition.
The Birkbeck team consisted of: Charles Shaw (MSc Financial Risk Management), Tim Poon (MSc Financial Risk Management), Mayundo Mwenze (MSc Financial Risk Management), and Rajivan Rajamohan (MSc Economics).
Find out more:
Birkbeck Economics + Finance Society
Join the Birkbeck Economics and Finance Society on Facebook
Birkbeck Department of Economics, Mathematics and Statistics
PRMIA Risk Management Challenge website and Facebook page
Other links:
Financial Risk Management (MSc)
http://www.bbk.ac.uk/study/2017/postgraduate/programmes/TMSRISKM_C/
Economics (MSc)
http://www.bbk.ac.uk/study/2017/postgraduate/programmes/TMSECNMC_C/