If you manage accounts well, you can run the bank well. However, if you do your sums right, it can help banks cover their risks in the financial markets. Deutsche Bank has ventured into an interesting exercise to harness the power of maths to manage risks better.
The German bank has in a joint venture facilitated by Matheon, the German Research Centre (DFG), set up a QP Lab (Qualitative Product Lab) in Berlin to focus on risk management and handling of derivates in the financial markets. Mathematicians from the famous Humboldt University and Berlin Technical University are working with bankers to develop and design new models that will help Deutsche Bank de-risk and also handle the volatility in the financial markets better, explained Prof. Dr Juerg Kramer, President and Head of the Dept. of Mathematics, Humboldt University.
Dr Kramer, who is also member of the Executive Board of the DFG Research Centre Matheon, told Business Line that the theory of probability, new algorithms and codes are useful tools in mathematical finance that can help industry. About 25-30 researchers are working at the Lab, which gets an annual funding of €4 million from the bank.
Matheon is joining hands with industry to develop models, simulate and optimise real world processes in the area of discrete mathematics, numerical analysis, computing, etc., to solve the latter's problems. Dr Kramer is leading a large team of German mathematicians to the ongoing ICM 2010 here.
Mathematics powers several of the technologies that make our lives better. For example, the use of computers, cars, airplanes and cell phones. “We play the stock market or juggle credit-card debts”, without realising that behind all these technologies lay mathematics. Maths ensures that flight schedules can be kept, telephone networks don't break down and software runs smoothly, Matheon says.
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