QUANTITATIVE FINANCE

Quantitative Finance is one of the very active areas for applied mathematics, in terms of research and education.

The development of Quantitative Finance concerning the theory of derivatives pricing has experienced a massive growth over the last decades with countless publications, books, and academic journals. The field has become a new world since the Global Financial Crisis (GFC) in 2007. We have now seen the difficult, exotic problems of the pre-2007 days are no longer interesting, as the field underwent a paradigm shift. Simple issues for which there used to be textbook solutions now raise complicated questions, e.g., modelling roll-over risk, counterparty credit risk, single- and cross-currency basis spreads in swaps and forwards, the realisation of model risk because of model assumptions, model parameters, calibration and hedging. The research programme solves problems in financial valuation and risk management using advanced techniques from the field of mathematics, statistics and computing. This is far broader than just options and other derivative financial instruments.

Goals and scientific orientation

The main goals of this Programme are to disseminate research studies that challenge classical assumptions in finance and provide practice guidance on quantitative finance and various long-term quantitative investment strategies within South Africa and beyond. Its target members range from academic researchers to industry practitioners with a keen interest in applying quantitative methods in finance.

The Programme’s scientific orientation is towards financial risk management, with high priority given to industry-relevant research. The Programme aims to contribute to a better general understanding of the mathematical approach to quantitative finance and risk management, a topic with a significant social importance. One of the main focuses is to engage in more interdisciplinary research. One such area is a quantitative study of Sustainable Investment Policies, for example, investment policies that consider Environmental Societal Governance (ESG) criteria, and price ESG-linked financial derivatives.

Moreover, the Programme seeks to have a broad spectrum of research streams, such as modelling of new risks phenomena and new markets (electricity markets, emissions trading, liquidity risk modelling, and quantifying model risk). It is supported by cutting edge tools of mathematical finance, statistical and computational finance (e.g., optimisation methods, financial econometrics, machine learning and parallel computing).

Members of Research Programme

From 2023: Dr Mesias Alfeus (PI) (Stellenbosch University)
From 2023: Prof Daniel Polakow (Stellenbosch University)
From 2023: Prof Conrad Beyers (University of Pretoria)
From 2023: Prof Riaan de Jongh (North-West University)
From 2023: Prof Michael Graham (Stellenbosch University)
From 2023: Dr Chioma Okoro (University of Johannesburg)
From 2023: Prof Helgard Raubenheimer (North-West University)
From 2023: Prof Ronald Richman (Old Mutual Insure)
From 2023: Prof Willem Schutte (North-West University)
From 2023: Prof David Taylor (University of Cape Town)
From 2023: Prof Tanja Verster (North-West University)

PI – Principal investigator (programme manager)

Papers Submitted

Alfeus, M., Nikitopoulos, C. and Overbeck, L. Implied Roughness in the Term Structure of Oil Markets Volatility, submitted for publication, 2023

Alfeus, M., Fitzhenry, K. and Lederer, A. Stochastic Default Risk Estimation: Evidence from the South African Financial Market, submitted for publication, 2023

Alfeus, M. Roll-Over Risk: New Evidence from an Emerging Market, submitted for publication, 2023