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Wakeupcall

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 643045.

EU project WAKEUPCALL is a European Industrial Doctorates (EID) project, funded in the Horizon2020 framework.

It is a Marie-Curie initiative in which six Early Stage Researchers (ESRs, like PhDs) will work closely with industrial partners on a PhD Thesis in applied mathematics. In this EID proposal we will thus combine efforts among academic and industrial beneficiaries in three countries, Spain, Italy and the Netherlands. Driven by the academic beneficiaries, from the Departments of Mathematics of the University A Coruña (Spain), the University of Bologna (Italy), the Delft University of Technology (the Netherlands), and CWI -­ the research center for mathematics and computer science, Amsterdam (the Netherlands), we wish to perform advanced research and educate Early Stage Researchers in close collaboration with our industrial partners in the field of modern risk management. The industrial partners that joined this EID are the bank Banco Santander (Spain), the insurance company UnipolSai (Italy), the financial and insurance consultants EY - Ernst&Young - (Netherlands) and Analistas Financieros Internacionales (Afi, Spain). We team up with engineering risk analysts NIER (Italy) plus the software company VORtech (Netherlands) with expertise in numerical algorithms and parallel computing.

With the ESRs we will perform research in mathematical and computational issues as currently required in the insurance and financial industries, in the wake of the recent financial crisis. This implies that we have a wide open eye for adapted regulations, proposed by the Basel Committee on Banking Supervision in their 2013 and 2014 recommendations. The six industrial beneficiaries have defined ESR research topics in computational mathematics, close to their long-­term interests related to the Basel and Solvency accords. Resulting is multi-­disciplinary research at the interface between applied mathematics and informatics, with applications from the financial and insurance industries.

EID WAKEUPCALL

In the WAKE of the financial crisis, a reconsideration of fundamental assumptions that have been standard in the mathematical models for the valuation of financial and insurance products, is taking place. The crisis alerted to reiterate models, assumptions, analysis and computations. It is now better understood that the usual paradigm, in which financial risks can be mitigated, spread, or even hedged away perfectly, is too simplistic for markets under stressed conditions. Lead by the Basel Committee on Banking Supervision, the financial and insurance industry is currently implementing new paradigms regarding risk management. Many of the updates in the risk measures involve sophisticated mathematics. In this sense, the crisis has provided important feedback on appropriate directions for the required mathematical improvements. As regards to hedging and risk mitigation, which are important steps in the risk management chain, nowadays even the hedging of basic financial instruments has become a complicated task. Since the 2008 crisis, the historically stable relationship between a bank's funding rate, government rates, and inter-­bank offered rates is no longer valid, which can be explained by credit risk, liquidity risk, and related bid-­ask spreads. More sophisticated models are needed if hedging programs are to remain effective under financial stress, but then also model risk needs to be taken into account. In this project, we bring together academic researchers in financial mathematics and high level professionals in financial and insurance industries, discuss and interact by means of training and research of ESRs. We are interested in the mathematical models, as well as in advanced numerical solution techniques used for pricing and risk measurement. We educate young experts in the broad field of financial mathematics, in modern risk measures and management. Advanced courses by academic and professional lecturers will be selected for the education of the ESRs. All ESRs will produce software or even frameworks, according to the standards in high performance computing.