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The interactive symposium TopQuants 2011-06: “Financial Modelling after the crisis” was held in Amsterdam on 28 June and has attracted almost a hundred quantitative professionals. The key note speech was given by Jan Sijbrand (then chief risk officer at NIBC). On the panel, Jan Sijbrand was joined by Ton Vorst (VU), Harold Naus (ING), Georges de Meris (E&Y), and Geert Ceuppens (RBS). After the lively panel discussion, the symposium was concluded with drinks and food. TopQuants would like to thank all speakers and attendees for joining the event as well as Ernst & Young for hosting TopQuants 2011.

The event has been attended by representatives of a broad range of Dutch financial institutions, including all major Dutch banks, the large audit firms and also of several smaller consultancy companies with quantitative finance expertise.

The key note speech was given by Jan Sijbrand. At the time of the symposium, Jan Sijbrand was chief risk officer at NIBC, but in the meantime has joined the governing board of De Nederlandse Bank (DNB, the Dutch central bank) as executive director responsible for banking supervision and supervisory policy. In his new role, Jan will surely benefit from both his broad experience in risk management as well as from his in-depth understanding of modelling. Both these aspects were also reflected in his key note speech. Under the catchy header “Models do not kill – people do”, Jan Sijbrand took the seemingly simple example of a Collateralized Loan Obligation (CLO). He employed this to illustrate how an incomplete understanding of a model and its limitations can lead its users to grossly misjudge financial risks and consequently take the wrong investment decisions. Jan also mentioned some new regulatory approaches and reflected on some of the consequences of these new rules. All slides of Jan Sijbrand’s presentation can be found here.

The key note speech was followed by a panel discussion. On the panel, Jan Sijbrand was joined by Ton Vorst, Harold Naus, Georges de Meris, and Geert Ceuppens. The TopQuants organizers structured the discussion by asking the panel members to comment on five deliberately provocative and controversial statements, while at the same time giving them the opportunity to also bring up additional topics of relevance. The statements were:

1. Using standard models in stress tests makes no sense: the tail is driven by other risk drivers
2. The value of data is heavily overestimated: today’s data quality cannot support good modelling practices
3. The move of the market to OIS discounting of collateralized trades is temporary: in time the market will return to pre-crisis practices
4. Liquidity risk cannot be modeled
5. FD 27-6-2011:
• “Bij de banken is de riskmanager vandaag aan de macht”
• “Today in banking the riskmanager is in charge”

Ton Vorst, professor at the department for Finance at the Vrije Universiteit (VU, Free University) Amsterdam, stressed the need to review the basics of financial modelling in order to lay a solid foundation that reflects all the new aspects the crisis has confronted us with. This view was shared by Geert Ceuppens, head of flow rates Quantitative Analytics at the Royal Bank of Scotland (RBS), who supplemented it with copious technical examples from e.g. the post-crisis approaches to curve building. Harold Naus, head of Market Risk at ING, emphasized the need to make the character, underlying assumptions and limitations of models more accessible to non-quants. On a similar note, Georges de Meris, Audit services partner at Ernst & Young, sketched the changing scope of the auditors, who are nowadays routinely asked not only for an opinion on risk management processes, but also for an independent opinion on model applicability, model usage, and choice of input data. All panel members were open to questions and remarks from the audience.

The symposium was concluded with drinks and food, giving all participants ample opportunity for additional discussions and networking. Attendees appreciated the informal atmosphere and the opportunity to chat about current topics with representatives from financial institutions other than their own. Facilitating such an informal exchange between quants constitutes one of the core objectives of the TopQuants network.

All registered attendees of the event have received a link to a questionnaire. The TopQuants organizers are curious to know how the event has been experienced by the participants. Clearly, comments and suggestions for improvement will be taken into account when planning upcoming TopQuants events. Of course, feedback does by no means have to be confined to this questionnaire! You are also welcome to contact us directly via TopQuants.

TopQuants would like to thank all speakers and attendees for joining the event. TopQuants would also like to thank Ernst & Young for their generous hospitality during the TopQuants 2011 symposium at their Dutch headquarter office in Amsterdam.