Marjon Ruijter graduated with honours ('cum laude') on her thesis on Fourier methods for finance and economics. She defended her thesis on Friday 6 February 2015 at Delft University of Technology.
Financial decisions usually involve inherently uncertain aspects, such as the future value of a stock option or the development of interest rates. Finding an efficient way to value financial products involving such uncertain factors is an important question in financial mathematics. Economists often face choices involving economic uncertainties. For instance, should we build a new factory, or is it better to wait until the interest rates are lower? Should we invest in dike heightening now, or should we wait until we are more certain about the rising sea level? Using advanced mathematical techniques, financial mathematicians value such uncertainties in different future scenarios.
Techniques based on Fourier methods have gained popularity in the recent years, mostly due to their speed, which allows them to be used for short-term decisions such as in stock trading. In this technique the probability distribution of the variables, which is usually unknown, is approximated from its known shape using Fourier transformations. In her thesis, Ruijter expands this technique, amongst others to include multiple, correlated variables and a type of problem which steers towards a certain terminal condition, such as a fixed pay-off.
The results of this research cannot only be applied to financial and economic forecasts, but also to other questions involving uncertain developments. As part of her research, Ruijter investigated the long-term economic effects of climate change at the request of Centraal Planbureau (CPB) for various temperature change scenarios.
The project is the result of an additional investment in CWI by the Netherlands Organization for Scientific Research (NWO) in 2010, and additional funds provided by CPB. Research was carried out at CWI in Amsterdam under supervision of prof. dr. ir. Kees Oosterlee.
Thesis: Fourier Methods for Multidimensional Problems and Backward SDEs in Finance and Economics
By: Marjon Ruijter (CWI Scientific Computing group)
Promoter: Prof. dr. C.W. Oosterlee (CWI and TU Delft)
Date: 6 February 2015, 12.30h
Place: Aula, Mekelweg 5, Delft