Intern Pricing Model Validation

MSc thesis internship Pricing Model Validation

Utrecht, 40 hours

Imagine

Imagine the opportunity and the freedom to write your master thesis in the challenging risk environment of Rabobank, researching cutting edge methods and techniques in valuing financial derivatives. Are you ready to put your skills to the test? As a master thesis intern within the Pricing Model Validation (PMV) team, you will have an opportunity to contribute to quality of the bank’s models to price financial derivatives.

Making a difference

Your main tasks will be to research a topic in the domain of derivative modelling. By doing so you will make an impact as the topic is practically relevant for the bank, while at the same time being the perfect mathematical challenge for you to complete your master thesis. You will be working on recent developments from the academic society that are new to the bank. Eventually the goal is for your research to be used in practice. You are expected to be an independent worker, yet sufficient professional guidance will be provided to you by your supervisors from within the team.

In order to create impact, teamwork should be your second nature and you need to bring,

  • good mathematical knowledge;
  • solid knowledge of programming techniques;
  • a drive to improve quality;
  • excellent written and verbal skills in English;
  • good presentation skills.

You will work on your own development in partnership with Rabobank, for now, tomorrow, and the future. We are a socially involved organisation with clear values and a focus on people, development, and diversity. That’s how we make a difference, for you, for ourselves, and for our environment.

With each other

You will be performing your thesis research within the Pricing Model Validation (PMV) team, which consists of 12 highly motivated members with quantitative backgrounds. In our team we have an extensive track-record with the supervision of thesis interns, currently there is also another intern employed.

Niels Jonkman, MSc thesis intern. ‘I enjoy writing my MSc thesis at PMV because the friendly and motivating people help me to get a solid preparation in quantitative methods for finance and help me write the best thesis to my ability.  A MSc thesis at PMV makes sure that you get good guidance to solve state-of-the-art financial problems. Everyone at PMV is always willing to answer questions or help you in another way such that you learn more about applied mathematics, finance and the bank.’

Jan van der Linden, PMV team member. ‘What I like the most in my work is the combination of various kinds of applied mathematics in combination with programming and problem solving. Besides that it is great that we can avoid a lot of manual/repetitive tasks by automating processes. In PMV we have the ability to learn from colleagues, to do courses ourselves and to build up hands-on experience with different type of projects.’

With you

A strong drive to learn, flexibility, enthusiasm, excellent communication and analytical skills are essential. The checklist below describes you:

  • an excellent academic track record in quantitative finance, econometrics, mathematics;
  • result driven;
  • ability to work independently;
  • implemented different models based on a mathematical description;
  • hands-on programming experience in Python;

Preferred

  • experience with typesetting system LaTeX.

Research Questions

Within our team we offer the possibility to do research on one of the following four topics, depending on the interest of the candidate:

1. Smile Modelling in Commodities

Futures are the most liquid commodity contracts, followed by option derivatives on

futures prices. Plain vanilla options on a single futures price are usually liquid in commodity markets along with spread options on two different futures. However, an increasing number of customized derivative contracts on futures prices are traded over the counter, or they are embedded within structured notes. Since such kind of contracts are usually sensitive to smile effects and include path-dependency, a pricing model is needed for futures prices which is able to describe both curve and smile dynamics. The goal of this research would be to investigate a stochastic-local volatility model for derivative contracts on commodity futures, both dynamics and calibration and suggest the ways to modify and improve.

2. Cheapest-to-Deliver Collateral with Recurring Neural Networks

Since the financial crisis of 2007/2008 the number of derivative contracts that have

collateral agreements has increased dramatically. The collateral agreements mitigate

counterparty credit risk and constrain the contagion effects that a default has on possible

defaults of other counterparties. However, interest has to be paid on the collateral,
which brings along funding costs. Generally the party would want to post the collateral in the optimal currency, often referred to as the currency that is “Cheapest-to-Deliver” (CtD). The choice of which currency to post collateral in leads to optionality and the value of this optionality can be of a great order. Therefore, it is important to take this optionality into account. The problem of optimal posting can be framed as a stochastic control problem (SCP). The aim of this research would be to make use of neural networks in order to solve this SCP with low computational complexity.

3. Generalized Forward Market Model (FMM)

During the 2007-2009 credit crisis, widespread attempts to manipulate LIBOR by banks
were reported and later investigated by both the UK and US governments. As a result in
2013-2014 the Financial Stability Board (FSB) conducted fundamental reviews of major
interest rate benchmarks and recommended developing alternative nearly risk-free
Rates (RFRs) that are better suited as the reference rates for certain financial
transactions. These RFRs in various currencies are expected to be introduced to replace
Libor if or when the benchmark ceases after 2021. These RFRs are overnight rates,
whereas Libor is a forward-looking term rate. At the current stage it appears that the majority of the market participants are leaning towards using a backward-looking term version of the RFR as a fall back to Libor. The goal of this research is to investigate a generalized Forward Market Model (FMM), which is an extension of the classic single-curve LIBOR Market Model (LMM).

4. Computational Challenges in Risk Calculations for XVA

Pricing of over-the-counter (OTC) derivatives has historically relied on the Black-Scholes’
risk neutral pricing framework, under the assumption of funding at the risk-free rate and
the ability to perfectly replicate and hedge derivatives. This assumption however does not hold anymore post financial crisis of 2008 and therefore the bank has to adjust the risk-neutral value to take into account all associated risk like counterparty credit risk when valuing OTC derivatives. X-Value Adjustment (xVA) is the generic term referring collectively to a number of different adjustments made to the risk neutral value of the derivatives contract held by the bank to take into account funding, credit risk and regulatory capital costs. The goal of this research is to investigate the different algorithmic approximation methods developed to solve the computationally efficient issue of risk calculation in xVA for portfolio with vanilla and/or exotic interest rate products and suggest ways to modify and improve the currently best algorithmic approximation method.

Growing a better world together

You'll already be aware that Rabobank is a financial services provider for 7.1 million customers in 40 countries. But did you know that we aim to contribute to real change with our 'Growing a better world together' mission?  We do so in countless ways, such as:

  • Yearly we invest heavily in the Dutch voluntary sector. We support 1250 organisations for sports and culture, which are a second home for many people.
  • In a project with Humanitas we help people with financial problems, struggling to organise their home finances.
  • Together with Refugee Work Netherlands we help 1.500 refugees to find a suitable job.

    Interested? 

    Do you want to become the ideal version of yourself? We would love to help you achieve this by focusing firmly on your growth, development, and investing in an environment where you keep learning every day. We give you the space to innovate and initiate. In this way, we offer you numerous opportunities to grow and help you exceed your expectations, to do the right thing exceptionally well, and to therefore grow as a professional. In addition, with us (on the basis of a 36-hour working week), you can also expect:

  • a compensation of € 500,-;
  • a thirteenth month and holiday pay;
  • 100% reimbursement of the costs of home/work travel if you travel by public transport and do not have a student OV;
  • possible access to sport facilities at the Rabobank main office.

    Please submit your CV, cover letter and transcripts of university grades by clicking on the Apply Now button below. Make sure to include the exact time span in which you are available in your cover letter.

    Let's meet.
    Are you the person we're looking for? Are you ready to join the PMV team in Rabobank as a MSc thesis intern and to make a difference to yourself, our customers and to society? We look forward to receiving your application for this vacancy in Utrecht.

Good to know:

  • For an internship you have to remain enrolled at a university for the whole duration of the internship.
  • The aimed start of the internship is September 2020, but actual start date can be discussed.
  • Applications are open until April 15 2020. Apply via the button “Apply now”.
  • If you have any questions about the specific details of this position, please contact Erik van Raaij, team lead PMV on +31 30 71 22748 or erik.van.raaij@rabobank.com.
  • Linda van Gogh, recruiter would be happy to answer any questions about the application procedure via Linda.van.Gogh@rabobank.nl.
  • The application process includes screening. Based on the screening procedures in place at Rabobank, we assess whether new staff are reliable enough to work at Rabobank.
  • The application process for this vacancy includes an individual assessment.
  • Your privacy is important to us. Do you want to know more, click on this link.
  • Everyone is different, and it is exactly those differences that help us become an even better bank. That's why we want to know who you really are!

Intern Pricing Model Validation

Type contract Stage
Vakgebied Data & Analytics
Locatie Utrecht (Nederland)
Referentienummer JR_00021747
Publicatiedatum 14 februari 2020
Reageren tot 14 februari 2021

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