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Feb 7

Interview: Thijs Van Den Berg From Sitmo.com

Posted by abiao at 13:09 | Interview | Comments(0) | Reads(6572)
Standing on the shoulders of giants allows us to see further, from now on we will invite experts to share with us their valuable experience and lessons.

It is our great pleasure to have Thijs van den Berg joining this week's interview session, Thijs is the manager of Sitmo B.V founded in 1998, which was initially a derivative market-making firm operating on the European Options Exchange (now Euronext), but soon building customized derivative models and risk management software development became an important activity. In 2003 Sitmo started consultancy services in Energy trading and quantitative modeling.

Tell us a little background info about yourself. Where are you from? What’s your education background?

I’m from The Netherlands. As long as I can remember I’ve been curious: math, physics. I got my first computer when I was 10 and things became magical: I had my personal desktop lab to experiment with! About that time my family decided to move to a sunny island. I had a great time windsurfing, surfing and skating, but education was a bit 2nd place. I went a year to a local Spanish school but didn’t speak much Spanish and so the only thing I could follow was the math classes. The second year I went to a British International school and that was very intense and good. Every morning sausages and beans etc. After that we moved back to The Netherlands, I skipped a school year, and eventually went to the Delft Technical University when I was 17 to study Computer Science. The first year was perfect -I was in the top 5-, but then I started to doubt my choices... I ended up working in a popular bar and was really enjoying that, ..until a professor knocked on my door and said he wanted to talk to me. He’s now a very good friend. After that I quickly finished university, did a thesis at a bank on forecasting with Wavelets.

Do you have any experience with quantitative finance? If yes, how long have you been in the quantitative finance industry and to what extent?

I ran into QF when I started trading (equity) derivates on the floor in the 90s. I’d build our own option pricing models and risk management tools, those were great times, we always had different prices than other traders, but we got it right... After that I got a job running a quant department at an energy Company. Energy trading was in its infancy: there was extremely much to do from a modeling perspective. The commodities have very complex dynamics, exotic assets, optimization, load forecasting, credit, data warehouses. We managed to get a couple of good PhD on board who delivered good models on fundamental activities. It was a true startup: when I joined the company the trade floor was just 6 people, when I left 250 with full blows specialized departments.

I left there in 2003 and I started my consultancy firm and have been doing that ever since. I took one year off in 2008 setting up an algo trading firm with two partners. It was very heavy on computing, scalability, reliability, data mining, stream processing, exactly replicating exchange matching engines etc,.. lots and lots of C++. It was great fun, very long days, but we made a fatal mistake at the beginning with the contract. It ended up being a big write-off, and an expensive lesson learned.

What is your specialty? Equity, fixed income, derivatives or others, and to what extent?

I think my specialty is more my drive to perform and solve. I enjoy learning new things very much, and I seek new types of problems whenever I can. In general I do a lot of strategic advice, energy, coding and trading related projects. My last project was completely different: a 7 month fixed income model validation and liquidity modeling task.

What accomplishments so far are you the most proud of?

I’ve build a modeling framework that can learn complex non-linear dynamic from observation data. It performs extremely well and it has a very elegant mathematical foundation. It’s very versatile and I use it to model complex time-series like energy spot stochastic, volatility term structures, intra-day FX, even weather dynamics like temperature, wind speed and light –intensity. I think I’ve invested at least 4 years in developing the math and coding.

Why did you choose this career? What are the pros and cons of working as an independent consultant instead of in a big company?

My parent had their own firm, and that’s one of the first reasons. Another reason is probably my personality: I enjoy initiating things, I thrive on new knowledge and solving complex issues, and I’m not risk adverse, I like to challenge things and innovate. The cons are the unclear distinction between work and home. Clients are expecting a lot of performance, and there are always tight deadlines. Socially it’s of-course also a bit different, you come and go. My colleagues are probably my peer consultants I regularly team up with on projects.  

What do you think it takes to be successful as a quantitative analyst?

Be honest to yourself. Never bend figures towards a predefined goal by anyone. When modeling: know about model error and over fitting, always try to validate results with common sense back-of-the-matchbox bounds and simple proxy models. Know the difference between accuracy and precision. Another aspect of being honest to yourself: when you’re wrong directly say that you were wrong, it takes guts to do that. People will respect that, and it allows you to move forward faster.  Time management is also very important. Continuously try to deliver small increment, don’t hide in a closet for half a year.

What is the single toughest challenge you’ve had to face in your past projects, and how did you get through it?

The toughest challenge was working in an extremely political war-type of environment and try to be productive. Almost all divisions at my client were in serious conflicts with each other, managers trying to get each other fired, lying, put the blame of failures on each other, there were coupes. No one was looking after the company. I had to pick a couple of battles and those were mainly on establishing clear boundaries professional and making clear that I don’t accept certain type of behavior.

What is the future of quantitative finance in your opinion, especially after the financial crisis?

My opinion is that there will always be need for improving things. Saving money for a company, helping make better decisions, help them value things more precisely, help reduce risk and save on capital needs. These activities will always be valuable.

What have you been up to recently? What projects are you working on?

Many things in 2011. For a bank I’ve done model validation, setting up swap curves and building liquidity management models. I’ve done a strategic advice for a large international utility that wanted to quantify their strategic lobby possibilities. I’ve started an open-source Quantitative Finance Code Library Platform with Paul Wilmott and Daniel Duffy. I’ve build optimization and risk models for a large group of CHP owners to help them optimize their operation and manage their risk. Another optimization modeling project was for the water utility. They have storage buffers, strict safety bounds and use lots of energy to process water and pump it around the country.

What is the best advice you’ve been given and you like to share with Quant wannabe?

During  a review, ask your managers about the things you are not good at and then don’t try to get upset about that but instead think and talk about it. These things typically transcendent the workplace and not many people tell you about your flaws in your life.

How do you like to spend your free time?

My family is vey important to me, I like to not just work 24/7 but also be at home, I value that highly. I run to keep fit, I still have a skateboard and there is a skate park around the corner.  I enjoy playing pool with my friend, go with then to camp at festivals and see bands. Another thing I like it those relaxing spa’s with my wife -but I hardly do that-.

Do you have other suggestions you like to share with us?

Try to be happy and have a diversified identity, you only live once.

How can people contact you for consulting business? Do you have a website or Twitter account or Facebook “Like” page?

Website: www.sitmo.com, email: thijs@sitmo.com, twitter: sitmo_com

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