Cooperation with University Cambridge

Modern (continuous-time) financial mathematics has repeatedly attracted public attention by its spectacular results, some of which have even been awarded with Nobel prizes. Most parts of this modern mathematics is successfully applied daily in numerous banks. Many theoretical results of modern financial mathematics still have to be examined with regard to their practical applicability and with regard to their transformation to the industry.

The crisis of the financial market in 2007/2008 made clear that risks were underestimated and methods of financial mathematics were insufficiently or wrongly applied. The crisis was triggered by an uncontrolled credit allocation and that banks over the world entered into the default risks. This is particular irritating given the intensive recent discussions on managing the risks at financial markets in the light of the new Basel capital accord („Basel II“). The financial market faces right now liquidity problems, because the banks do not trust each other due to the (almost) bankrupts (Lehman Brothers, Merrill Lynch, Hypo Real Estate, IKB, HBOS, Brandford & Bingley, Fortis) and therefore do not lean money between each other.

We see a big necessity for the development of further theoretical models for fundamental aspects of risk management and modelling in the finance business (among others also within neglected areas such as liquidity planning), as well as the concrete application of so far only theoretically relevant results (e.g. results in continuous-time portfolio optimization under practically relevant constraints such as transaction costs), and finally the development of simulation software which could be used for asset liability management in banks and insurance companies.

Our partner is the financial mathematics group at University of Cambridge. It is represented by the financial mathematics group of Prof. L.C.G. Rogers and the group of Prof. M. Dempster.

Our partner can be considered to be among the world wide leading research group in both the areas of applied as well as theoretical financial mathematics.