"Financial institutions need to embrace change"
#QuantWomen highlights key women in the quantitative finance industry. Today, we speak to Dr. Svetlana Borovkova, Associate Professor of Quantitative Finance, Vrije Universiteit Amsterdam and Head of Quantitative Modelling, Probability and Partners about her interest in the field and advise to new starters. Svetlana will be at QuantMinds International discussing sustainable and impact investing.
How did you start your career?
Since I was very little, I loved numbers and maths. When I was three, I would be standing at a bus stop with my mam in Moscow, and add the bus numbers in my head as they came along. And in Moscow, buses have three-digit numbers: 608, 299 and such. So the choice was made quite early that I should study maths. Moreover, I grew up during the tail end of communism in Soviet Union, so being journalist or a historian meant complying with the ideology, and maths is obviously beyond ideology.
What was your lightbulb moment?
I graduated from an applied math department at a military high college and then communism collapsed. So I started looking abroad, and entered first a Master and then PhD program in The Netherlands and in US. During my PhD, I worked on chaos theory which was very sexy at that time, but still very theoretical for my taste.
The lightbulb moment came at the time Scholes and Merton have received their Nobel Prize for economics, for their famous formula. At the time of the announcement, I was in London, attending a meeting of Royal Society, which, upon the announcement, quickly turned into a discussion (and for uninitiated mathematicians like myself - into a tutorial) about option pricing and quant finance in general. The minute I heard the explanation of the Black Scholes option formula and binomial tree, the penny dropped - I understood the beauty and elegance of it and its awesome usefulness at the same time - concepts usually incompatible in maths (except for cryptography, things in maths are either beautiful and elegant or useful, but not both).
I immediately thought: this is what I want to do. So after receiving my PhD, I departed to London, to Shell trading, and became an analyst for oil trading desk. First thing I had to do is to develop their very first Value at Risk system. And the second thing happened to be an arbitrage futures trading strategy that generated more money per barrel of oil than any Shell refinery (and continued generating profits for years afterwards). So you could say this was a flying start. Although nowadays I branch into many different areas of quant finance and risk - ranging from derivatives pricing and quantitative risk models to sentiment analysis, financial stability and systemic risk - commodities and in particular energy markets have remained my soft spot - first love never dies I guess.
It is scientifically proven that women make better investment decisions and have a better understanding of risk, and hence are superior investment and risk managers.
Why do we see so few women in quantitative finance?
Currently I also run a prestigious MSc honours program in Quantitative Finance and Risk Management in a Dutch university, and every year I try incredibly hard to attract girls into our program. Unfortunately without much success. I am puzzled by this - quant finance offers such amazing opportunities at the moment and for years to come, work is almost never boring (except when you have to do stuff for regulators) and hours are much more human than, say, in corporate finance or M&A. Moreover, it is scientifically proven that women make better investment decisions and have a better understanding of risk, and hence are superior investment and risk managers. There are plenty of girls coming out of quantitative bachelor studies but they all go to computer science and data analytics and not to quant finance. So I have no explanation for the lack of women in our field, and my herculean attempts to change things, at least at the level of my program, so far have been completely futile.
What advice do you have for women starting out their career in quant finance?
My advice to women considering career in quant finance is borrowed from Nike: just do it! As I said, work is fun, hours are not too bad, opportunities are plentiful and, as a woman, you will have an incredible edge in this environment, especially as financial firms are pressed really hard to improve their gender diversity. Let alone the unlimited amount of eligible men on fat salaries you get access to.
What will the future of quant finance/risk management look like?
Regarding the future of quant finance and risk management: I think it is quite rosy. The increased regulation means of course, on one hand, more boring work, but on the other hand - simply more work, more jobs and more opportunities. Another area which could lift our profession on the next level is FinTech. So for people with combination of quant, AI and computer skills (who now only strive to go work for Google and such) this will be an excellent career path. However, for this, we need big financial institutions to embrace change, become more agile and light on their feet, think and act quickly. If this happens in the next 5 years, future of our profession is guaranteed. If not - we can still go and work in alternative finance which will then take place of traditional finance.
