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Mark Joshi : «senior management have to be more mathematically sophisticated»

Mark Joshi has worked for RBS from 1999 to 2005. First as quant analyst and then head of quantitative research within the risk department.

Article also available in : English EN | français FR

Since November 2005, he is associated professor at Centre for Actuarial Studies

We often talk about "The City" as a jungle where people focus only on profits. "Profit over people" like Noam Chomsky said. What come into your mind when thinking about your experience within this industry and what lessons can you draw as a scientist or just a man?

I rarely agree with Chomsky about anything. The fundamental issue with the city is that people work in banks for the money, and this translates into a culture where people are rated according to how much money they immediately make for themselves and the bank. This has a tendency to cause an amateurish and short-termist culture.

You had worked for 6 years as quant analyst then head of quantitative research at RBS. What was your role ?

We were a general quantitative resource for the Group with specific focus on risk issues. We also evaluated models for derivatives pricing focussing on the assumptions underlying the models.

We often talk about conflictual relationship between quants and traders, any views ?

I noticed more conflict between risk functions and trading functions than between quants and traders. This was an inevitable consequence of the tension between profit and control.

why did you move back to academic world after such a promising carrer in the city ?

My career is now somewhere in between, since I am working with various banks as a consultant. Ultimately, I prefer to work in an organization where I can do work driven by my own interests.

How do you see the future of finance and what will be the key issues to address?

To me the main problem of derivatives pricing is to produce tractable models that both reproduce market smiles and their dynamics. Whilst progress has been made, there is a long way to go.

Related to this the problem of understanding how more accurate models for the underlying translate into more sophisticated prices for exotic derivatives once one takes into account the ability to hedge with simple options is still not really solved.

More generally, the movement of banking towards economic capital frameworks should keep mathematicians busy for a long time. It may in the longer term lead to a situation where senior management have to be more mathematically sophisticated. This would I believe be a good thing.

F.Y , February 2008

Article also available in : English EN | français FR

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