Wall Street Needs
Rocket Scientists: Mathematics To The Rescue
This three and a half day PREP session will run over four days will be
held June 6-10 at Saint Mary's College in South Bend, IN. The Principal
Presenter will be Tom Struppeck from New York.
Early in their careers many undergraduates avoid majoring in
mathematics because of a misperception that a mathematics degree leads
only to a teaching career. In fact, mathematicians are some of
the highest paid employees in the financial services industry.
Available jobs include actuarial jobs at insurance companies or in
government, statistician positions, and "quant" jobs at
investment banks and hedge funds. Additionally, consulting
opportunities abound.
What can a mathematics department do to increase its attractiveness to
undergraduates looking for a major? At one extreme, the
department could offer a special degree possibly in actuarial
science. At the other extreme the department could offer a few
reading courses. Most schools will probably aim somewhere in the
middle. Regardless of where on this spectrum a
school's program will fall there are some common issues --- those
issues will be the focus of this PREP session.
Prior to arrival at the session, participants will be expected to have
read some material that is available online. Among the
preparatory readings will be these two notes:
The first (which is very short) gives an example of arbitrage pricing:
The second (which is longer) illustrates that actuarial tools can be
used to solve problems outside of the insurance world:
In neither case is any prior knowledge of baseball assumed.
Additional readings and other material will be circulated after
registration.
Schedule
Tuesday, June 6:
(late afternoon or early evening)
arrival at Saint Mary’s College and check-in after 3:00PM.
Wednesday, June 7:
Morning session (8:30 – 11:30)
Introductions
What type of program do you want?
(from smallest to largest)
Directed reading courses.
An elective tract in an established mathematics program?
A formal degree option in the mathematics or statistics department
A separate department
What is your goal?
To produce educated students that can prove theorems involving
actuarial topics?
To produce educated
students that can demonstrate knowledge of actuarial topics in the
workplace?
To produce students
that can pass the actuarial exams?
To produce students
that can go on to graduate school in mathematical finance?
What is the commitment on your part?
If you start a
cohort of students down a path, you need to keep offering classes until
they finish.
What are the actuarial exams?
SoA
CAS
EA exams
Foreign exams
What are the topics?
Exam 1/P
Exam 2/FM
Exam 3/M
Exam 4/C
VEE
Higher exams
Don’t forget, things change.
Lunch
break (11:30 – 1:30)
Afternoon session
(1:30 - 3:30)
How have other people done it?
Prior to the session,
sample syllabi from established programs will be circulated.
A preliminary assignment will be for each of you to
prepare comments on how these would need to be modified to fit your
individual institution and program.
Adding actuarial examples to calculus
and probability courses. (Exam 1/P)
Compound interest as an example for calculus
courses
(Exam 2/FM)
Ruin and Stochastic
Processes
(Exam 3/M)
Credibility
concepts
(Exam 4/C)
Thursday, June 8:
Personal Finance, Financial Mathematics, and Actuarial Models
This
day will a survey of those three topics and how they interrelate.
This session will be conducted by Chris Ruckman
and Joe Francis,
authors for BPP Professional Education.
Morning session
(8:30 – 11:30)
- Annuities
- Project valuation / Discounted cash flow analysis
- Inflation / Nominal vs. real interest rates
- Loans / Mortgages
- Bond valuation
- Stock valuation
- Derivative valuation
- Duration and convexity
- Immunization
- Term structure of interest rates
- Spot rates and forward rates
- Arbitrage
Lunch break (11:30 – 1:30)
Afternoon session (1:30 - 3:30)
Insurance
Why do people buy insurance?
Different types of insurance
Pricing insurance
Insurance and stochastic
processes
What pension plans, auto insurance, and
appliance warrantees all have in common
What are insurance “reserves?”
Exercises to be discussed on Friday
distributed.
Friday, June 9: Applied Credibility
This day will
discuss some of the various credibility concepts from exam 4
Morning
session (8:30 – 11:30)
Discuss assignment from previous evening.
What is credibility and why is it important?
Different kinds of credibility
Relationship to F-Test
Mixtures of populations
Demographics
Leslie Matrices (linear algebra application)
Lunch
break (11:30 – 1:30)
Afternoon session
(1:30 - 3:30)
The Exam 4/C Readings:
Why they are good for teaching a course.
Why they are bad
for teaching a course.
Alternatives.
How this material might be fit into an
existing statistics course.
Exercises to be discussed on Saturday
distributed
Saturday, June 10: Implementing a program
Morning session
(8:30 – 11:30)
Discussion of previous day’s
assignment
Okay, so you’ve decided to do this, now what?
What does a faculty member need to do to get up to
speed?
How to collaborate
with the business school?
What courses should
be offered as a minimum?
How can these
courses be taught within the constraints of an existing catalog?
Should your
students pursue an MBA? If so, how can you best prepare them.
Suggestions for
recruiting students.
Suggestions for
helping students get internships and jobs.
Noon:
Check-out and depart.
Accomodations
Saint Mary's
College, Opus Hall
On-campus housing arrangements
Participants will be placed in Opus
Hall, the two-year old Saint Mary's College student apartments.
*Bed linens and towels are provided
*private bedrooms
*air-conditioning
Rooms
are available from 3:00 p.m. Tuesday June 6, through Noon. Saturday
June 10, 2006
Meals begin with breakfast on June 7 and end with breakfast on June 10,
2006. Breakfast and lunch will take place in the Noble Family Dining
Hall on Saint Mary's College campus. Dinners will take place in the
surrounding community. Refreshments during the workshop will be
provided.
Directions
From the East or
West -
Take I 80 - 90 (Indiana Toll Road) to exit 77. Turn right on exit. The
Douglas Road entrance to the College is right at the first light.
From the North
or South -
Take US 31 to Brick Road exit. Turn East, which will be Cleveland Road.
Take Cleveland Road to US 33 (933) then turn right. The Douglas Road
entrance to the College is right at the fourth light.
South Bend
Regional Airport -
A ten minute drive to Saint Mary's College campus. Greyhound bus lines
and
Northern Indiana Commuter Transportation District (South Shore Rail
Service from
downtown Chicago) also has stations at the South Bend Regional Airport.
Biography
Tom Struppeck
Tom was teaching a probability course at Rutgers several years ago and
he made up an example of correlated random variables in an insurance
setting, the example suggested that insurance companies should avoid
investing their money in the same places where they insure against
hurricanes. A student raised her hand and said that she worked for an
insurance company and that the investment and insurance departments
didn't communicate at all. Four years later Tom was living in
Switzerland designing structured reinsurance products that combined
insurance and investments.
Now Tom lives in New York where he helps cities lower their borrowing
costs by insuring municipal bonds. Tom is a Fellow of the Casualty
Actuarial Society, a Fellow of the Society of Actuaries in Ireland, and
an Associate of the Society of Actuaries. He is also a general officer
on the Casualty Actuarial Society's examination committee.
Don Miller
In his early years at Saint Mary's Don, because he had taught in high
school, was the Mathematics Education expert. Through an NSF grant
coupled with a sabbatical he spent a year retooling in Operations
Research at Purdue University and returned as the resident expert in
statistics. While serving as Chair of the Mathematics Department, Don
introduced a major in Statistics and Actuarial Mathematics, and
continues to serve as the coordinator for the program.
Discussions with a colleague in political science on whether or not
funds from lotteries actually benefit education led to a series of
research papers and eventually a book, Gambling Politics: State
Government and The Business of Betting. The first paper,
"Lotteries for Education: Windfall or Hoax," demonstrated statistically
that hoax is the better conclusion.
Don has been quite active in the Indiana Section of the MAA, serving as
its chair and hosting two meetings, including a Tri-Section meeting, at
Saint Mary's. The section recognized his efforts with its Distinguished
Service Award in 2004. He has also served fourteen years as a
judge for the Mathematical Contest in Modeling.
Don is a member of the Saint Mary's softball coaching staff, which was
named 2004 MIAA Softball Coaching Staff of the Year.