Teaching and Research in Finance in Switzerland

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1 Teaching and Research in Finance in Switzerland Paul Embrechts Deapartment of Nathematics Director RiskLab ETH Zurich

2 I will only give a very brief overview and this mainly to initiatives I am involved with; further details on some of the programs mentioned can easily be found on the web.

3 Some initial remarks The Swiss University it System: it is a non-private system, where universities are mainly funded through the cantons (like provinces) and the state (in the case of ETH and EPFL). Also, admission is granted to basically all programs (Bachelor, Master) for students holding a so-called Matura, or equivalent. Switzerland follows the Bologna unification of university degrees within Europe, hence a 3 year bachelor followed by a 1 to 2 year Master.

4 As a consequence Education in Finance has to be seen at the various levels of the Swiss educational system. This system allows more possibilities for high-qualified education at the non-university level. The current Bolo- gna unification of degrees is changing this somewhat, as more and more young people now want a university degree. I will solely concentrate on university education.

5 Overall Picture Different Universities iti offer different aspects of Finance, including Mathematical Finance, Financial Economics, Financial Engineering, g, Corporate Finance, Accounting, Corporate Governance etc mainly depending on their academic competence and strength (see later SFI) Some Examples: ETH Zurich: Mathematical Finance, Quantitative Risk Management, Insurance Mathematics within the Mathematics Department; Financial Engineering in the new D-MTEC and more sociology and law related programs in D-GESS

6 EPFL (Lausanne): Mainly a broad program of Financial Engineering (see further) University of Zurich: Mainly imbedded in the Faculty of Economics and its sub-institutes like the Swiss Banking Institute University of Lugano: Idem University of Lausanne: Idem, but with a strong component of Actuarial Science University of St Gallen: More MBA-type and business oriented, also has laboratories on banking and insurance, among others

7 IMD Lausanne: Excecutive Education (like LBS and INSEAD, say) Further universities offer more economics oriented courses (Bern, Geneva, Basel) and there are numerous smaller, new regional universities (Luzern, Winterthur, ) that offer more applied/technical diplomas and courses. Below, I will concentrate on the education in Zurich (mainly ETH) and Lausanne (EPFL), but first discuss the important SFI.

8 SFI: The Swiss Finance Institute A new initiative, iti seed-funded d d by the Swiss Banking Industry with main aim to coordinate and facilitate teaching and research in Banking and Finance at the highest international level The current participants (axes) are: ETH Zurich University of Zurich EPFL and Universities of Lausanne and Geneva University of Italian Switzerland (Lugano) In this case, ax means based on an official joint agreement between the universities involved and SFI. Further member universities may join.

9 SFI Membership implies that the participating universities will maintain, and further strengthen the faculty in finance in general. New SFI-University co-sponsored professorships will be added, maintaining a careful balance between academic freedom and industrial/societal i i t l needs (example ETH ) Corporate Governance: Board + International Scientific Committee (ISC oversees and comments on SFI sponsor- ed appointments: t Example ETH )

10 SFI acts as an industry sponsored umbrella taking a serious interest in the ultimate reaching of its main goal of raising the teaching and research of finance in Switzerland Joint Doctoral Program for Finance across (SFI-)Switzerland Highlight and support specific Swiss issues Excecutive Education (joint with NYU-Stern) (Co-)Organization of specific conferences on finance For more information, see the SFI website:

11 The SFI sees its mission concerning Teaching and Research as follows (from their website): The Swiss Finance Institute is a research organization with a faculty of more than 50 full time researchers engaged in high level research in the field of banking and finance and related disciplines. i Together with its executive education arm, the Swiss Finance Institute Research center aims at increasing Switzerland s attractiveness for outstanding researchers, teachers, students and participants in executive education programs. Over the medium term, Swiss Finance Institute wants to achieve a leading position within Europe in major research areas relevant for banking and finance. Research will be promoted:

12 by helping universities to recruit new researchers with established potential. This will be achieved by endowing up to 30 senior and junior chairs, co-financing tenure track assistant professorships, awarding prizes and publication awards and establishing a fund to meet specific research needs. by supporting research projects in collaboration with the NCCR- FinRisk program. New research projects in addition to those currently financed by FinRisk will be funded by the Swiss Finance Institute. by developing a coordinated PhD program. and more generally, by insuring the best possible working environment to the affiliated researchers. "This will significantly raise the profile of Swiss research and executive education around the world and thus enable international knowledge transfer at the very highest level to the benefit of our country s financial sector as well as its education and training system," explained Olivier Steimer, President of the Swiss Finance Institute s Foundation Board. Remark: for information on NCCR-FinRisk FinRisk, see:

13 The SFI PhD Program The Swiss Finance Institute PhD Program in Finance is targeted towards the pursuit of academic excellence. It aims at providing an intellectual environment and a curriculum comparable with the top PhD programs in Europe and North America. The PhD program operates at the three Swiss Finance Institute campuses in Geneva/Lausanne (Léman), Lugano and Zurich. The curriculum comprises two phases: one preparatory year of intensive coursework followed by three years of advanced studies and research. The Program covers a wide range of subjects including Economics, Financial Economics, Corporate Finance, Mathematical Finance, and Econometrics. There is a clear focus on the mathematical foundations of Finance and all courses are taught by internationally renowned academics from Switzerland, Europe, and North America. The Program offers the ideal framework for successful and inspiring PhD studies in Finance. Applicants should have a strong interest in research activities and the desire to pursue an academic career or to continue their career doing research in Finance within the public or private sector. Ideally an applicant's academic record will prove a solid background in Economics as well as in Financial Mathematics although additional prerequisite courses at the beginning of the PhD program might compensate for weaknesses in any of these areas. We strongly encourage applications from women!

14 The Two Phases First phase: PhD Courses The Swiss Finance Institute PhD Program in Finance starts with a curriculum of PhD courses (core courses) taught in part by local Faculty and in part by distinguished visitors from high-ranking European and American universities. The aim of this intensive course-work is to provide all candidates with a broad and complete education covering the basic building blocks and conceptual tools of finance. Each of the participating Universities has established a program of core courses reflecting the strengths of its faculty. Their aim is to provide a perfect working basis to successfully finish the PhD program within three more years following the first phase. More information on the program of PhD courses can be found by clicking on the Center's name in the list below Léman (Universities of Geneva, EPFL and Lausanne) Lugano (University of Lugano) Zurich (University of Zurich)

15 There are examinations following each core course. The responsible faculty member can decide to attribute the final grade for his/her course based only on project assessments, on class participation as well as on graded interim homework. Students admission to the second phase (dissertation writing) is determined on the basis of the grades obtained on the core courses as well as (1) the successful completion of a summer research paper (for Geneva, Lausanne, and Zurich) or (2) a comprehensive examination (Lugano). The summer paper should be the first draft of a "publishable" " research paper. It should contain original theoretical or empirical work (no survey paper) developed by students on their own (under minimal guidance by a supervisor). An extensive selection of Master level courses is available to Swiss Finance Institute PhD candidates wishing to complete their education during the first phase of their curriculum. In addition to the courses listed above, a large number of courses in related fields are offered by partner academic institutions in the Swiss Finance Institute PhD program. These courses can be integrated into the course program of Swiss Finance Institute PhD candidates with the approval of the PhD coordinator.

16 Second phase: PhD Research Upon admission to the second phase of the program, Swiss Finance Institute PhD students select a thesis topic and choose their thesis advisor. Typically, students can become part of the research projects carried out at one of the various institutes involved and work within this project as a research or teaching assistant. The NCCR FINRISK network also guarantees intensive contact with PhD students from other Swiss Universities and provides an excellent and stimulating research environment. In this second phase of the PhD program, all PhD students are required to follow the annual PhD workshop at the Study Centre Gerzensee, the faculty s Research Seminar in Finance, and the internal Brown Bag Lunch Seminar (when such a seminar is offered). In addition, the NCCR FINRISK institutions offer large variety of specialized courses. The goal of these advanced d courses is to provide students t with the opportunity to acquire the specialized skills that are most relevant to their thesis work. The selection of the appropriate specialized PhD courses for each candidate will be made jointly with his/her dissertation supervisor. The completion of the PhD Program in Finance requires two successful examinations: a first examination after the first phase of the program and a final defense of the PhD dissertation. The degree "Doctorate in Economics with Specialisation in Finance" is awarded by the University. (These pages were taken from the SFI website and carry the SFI copyright)

17 From SFI to Individual University Programs Recall that in the SFI PhD Program, the folowing statement was very important: Each of the participating Universities has established a program of core courses reflecting the strengths of its faculty. Let us briefly look at two examples, ETH Zurich and EPF Lausanne

18 Finance at ETH Zurich Engineering i and Sciences at the highest h international level D-MATH (Mathematics) ti has a long history of teaching Actuarial Mathematics (more than 100 years) and also stepped in early in teaching and research in mathematical finance (since about 1986). RiskLab was founded in 1994 ( We have currently about 8 faculty in the field with an overall research group of about 30 researchers (Professors, Post Docs, PhDs); see for details

19 Research areas include: Mathematical Finance, Quantitative Risk Management, Actuarial Mathematics, Numerical Analysis and Operations Research in finance, (for details, see the relevant links on Other departments: D-MTEC (Management Technology and Economics ethz.ch/ ) is a strongly growing department working more on the engineering and social science aspects of economics in general and finance more specifically. E.g. Systemic Risk, Global Risk Management, Economic System Complexity, Further, D-GESS (

20 Several programs exist, including a joint Master in Finance between ETH (Mathematics) and University (Economics) of Zurich: aim for this very competitive international program is to offer a broader group of students, with a strong background in mathematics as well as economics, a highly hl competitive degree.(see ) Numerous specific diplomas exist within the standard ETH curriculum, see for instance:

21 Master in financial engineering at EPFL 1.Enable undergraduates at EPFL and similar institutions, with a strong analytical and mathematical background, to move into the world of advanced finance 2. Consolidate research in finance across multiple labs in various departments (College of Management of Technology, Mathematics, Information Systems, etc.) 3. Promote new research in the most promising areas of financial engineering by attracting a number of highly talented individuals from around the world

22 The program started in September 2008 a two-year program, with coursework over the first year and a half, followed by a six-month internship leading to a master's thesis What is Financial Engineering? Traditional: Security design, pricing, and hedging: It combines skills in: Finance Mathematics (stochastic calculus) Statistics Financial Engineering is also: Extreme-value risk analysis Market design and management (prediction markets, resource allocation, re-insurance,...) Understanding the economic reasons behind securities (Corporate Finance, Real Options Analysis) Finding the relevant information and investments (computer science) Etc...

23 Professional perspectives Graduates will gain, among other competencies, a good grasp of corporate finance, pricing of securities, structured products, risk management tools, and market mechanisms As such, they will have the perfect profile to integrate rapidly in investment banks, large investment funds, rating agencies, consulting and auditing companies, insurance companies, online trading companies etc... As an alternaive, they could enter top level Ph.D. programs in finance such as the Swiss Finance Institute Ph.D. program in collaboration with EPFL, with an eye on an academic career See: for details, in particular the program under

24 Some further development Recent development: we witness a growing interest in corporate sponsored chairs and research positions in insurance and finance. Examples include the Swiss Re Chair in Global Risk Management (ETH), the Vontobel Chair in Finance (UNIZH), the Swissquote Chair in Financial Engineering (EPFL); further examples are in the pipeline ETH Foundation! Key question: Consequences of the credit crisis??????. DISCUSSION!!!!!!!!