Dr Jörg Kienitz is the author of Financial Modelling – Theory, Implementation and Practice, an engaging title that we featured in our shortlist of the best financial modelling books. The book is also authored by Daniel Wetterau.
He has kindly accepted my invitation to be interviewed about the book, to give us an insight into its inception and to share his thoughts on finance writing in general. I’m delighted to be able to share his answers below.
Financial Modelling – Theory, Implementation and Practice falls under the following book topics:
Interview with Jörg Kienitz
1) Please could you tell us a little about your professional background and why you felt inspired to write the book?
When we wrote the book both of us were employed by a bank. I was the head of Quantitative Analytics then. At that time I felt there are numerous books illustrating methods and algorithms but the examples were mainly simple finanical models e.g. Black-Scholes-Merton formula or Monte Carlo with Geometric Brownian motion. We aimed to make more complex models accessible to the audience. We covered SABR extrapolation, Libor Market Models with Stochastic Volatility, Pricing CMS Spread options or considering Adjoint Methods. The latter have now become very popular within the Automatic Adjoint Differentiation (AAD) frameworks applied for xVA systems.
2) In the course of researching and writing your book – did you come across anything that surprised you?
Yes, since our aim was to provide source code we came across many challenges when we implemented the models but then we found suprisingly efficient and elegant solutions. For instance applying Fas Fourier Transform methods to Bermudan options for several strikes at the same time or when we considered adjoint methods we found a way putting this in a more formal and general setting which led to the paper “Affine Recursion Problem and a General Framework for Adjoint Methods for Calculating Sensitivities for Financial Instruments”.
Also running the examples and experimenting with extreme parameters made us aware that it is really hard to get a prototype into a production model. Finally I would like to mention that results in papers do not always generalize if applied to different parameter sets.
3) For budding financial writers, what is the one piece of advice would you give to those writing to educate beginners about finance?
I would say you should start with pinning your ideas of what you think your contribution is. Then, make a plan and just start. You have to be aware that you juggle with ideas and you will certainly change the way you present the material several times. But it is important to keep your overall goal – your main idea for writing the book. And of course: Never give up – tough times are ahead.
4) What else do you have going on that you’d like our readers to know about?
Currently I am investigating the application of Statistical Learning methods applied to Quantitative Finance. Together with colleagues I released some papers in this field and delivered several courses already. I wish to experiment more using the available software that is freely available. In my opinion there are great opportunities here.
5) And finally, I like to ask all authors; when saving and investing your own money, what is your preferred investing style?
That is hard to answer. It depends on the circumstances and your culture. For instance, Germans like to put money into simple saving accounts. However, with the advent of negative interest rates, this might not be the cleverest idea. One investment that definitely pays off is education. Thus, this is my favorite investment.