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Connections and ideas that are powering quant innovation

"Question everything (stereotypes included)"

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Laura Ballotta, Reader in Financial Mathematics at Cass Business school, joins the #QuantWomen series to discuss her start in the industry and tell us where she thinks quant finance will go over the next five years. Laura will be at QuantMinds International, as she explore calibration performance, hedging errors and forward implied volatilities in different markets. 

Laura Ballota QuantMindsHow did you start your career in finance?

I had just started my PhD and attended as part of the curriculum a course in “Derivative securities, pricing and hedging”. I thought it was a beautiful combination of economics, mathematics, computer science and finance. Therefore, I decided to specialize in this field with my thesis. After completing my studies I stayed in academia.

What was your lightbulb moment?

When I realized that the word ‘jump’ has a very rich connotation, and is not just a synonym for ‘market crash’. Models are usually developed by considering the Gaussian distribution (or the Brownian motion if we speak in terms of the driving risk process) as the first building block of a much richer architecture. In reality, a much better portrayal of the dynamics in the market - and more importantly a deeper understanding of our world - can be achieved when that building block is replaced by jumps: what can be obtained is much more agile. Even hedging - a classical argument against jumps - has the potential to work better.

Why do we see so few women in quantitative finance? (Or finance in general)

This is a very complex question, with many facets. I believe it is the result of numerous factors, like for example, a distorted vision about women who like mathematics and study it.

As an academic and an educator, this issue always rings a bell. Young girls should not be afraid of pursuing what interests them the most, even if this is mathematics and perhaps does not fit the stereotype. As many women have realized, you can be anyone you want: you do not have to choose between say being popular with your friends and being a Quant. You can be both.  For example, I have always been an athlete: a discus thrower first, a pole-vaulter after, and I even represented my country in both disciplines at few international meets.

Starting from school, we should always promote a culture based on ‘Question Everything’ (stereotype included) and persevering when a hard problem comes along which needs a long time to solve. Society and life are not so simple; and women should stand up for themselves and persevere.

What advice do you have for women starting out their career in quant finance?

Find out who you really are regardless and in spite of stereotypes and prejudices. Stand up for yourself and never compromise your integrity. In the end, you are the one who has to live with you every day! And never give up. It is fun and it is worth it!

What will the future of quant finance/risk management look like?

We are living  in a time when changes can happen at a very fast pace. Innovation comes from many places: AI, machine learning and block-chain just to mention a few. Changes are of course good but they bring a number of risks to the financial market and also to society. This is why these risks need to be investigated in advance. And indeed regulation is coming as well, rightly and properly. I suppose the key is to be able to distinguish between what is the fashion item of the day, and what instead has a lasting added value.


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