28 Sep 2005

Profit by Numbers – Last Lecture Series, 5 October

What does your insurance policy cost and how is the price fixed? Beyond complaining about the cost, most people never think about it, but if they did, they would find that in all probability, a complicated mathematical formula is behind the decision by the insurer to fix the price at a certain level.

And if you buy stock options, guessing, say, that at a purchase date in the future, the price of IBM stocks will go up rather than down, a similar piece of mathematical wizardry will be found to be behind the transaction price. In trade, in the financial industry in general, and in the markets where the ebb and flow of money is counted in billions each day, complex mathematical formulae are used to make sense of chance and probability in the ever more sophisticated world of high finance. In the end, it is all about profit and loss -yours or theirs - but mathematical expertise is always on the side of the big institutions. And it was always thus. Since the earliest times, mathematicians have been used in industry and commerce to help reduce exposure to risk and to maximize profits.

On Wednesday evening next, as part of UCC's continuing Science Lecture Series, Professor Bernard Hanzon of the UCC School of Mathematics, will deliver a lecture titled: Money, Movement & Mathematics - Building a Science to Deal with Financial Markets,  which will shed some light on the arcane and mysterious world of the mathematical gurus whose raison d'etre  is to make an uncertain world that bit more certain for those who engage in financial risk taking.

It is a fascinating world and it has its modern genesis in Chicago about 30 years ago when the markets began to deal in what are known nowadays as options -plumping for stocks today that may be bought at a future date and a future price. The question was - how should the financial institutions write contracts for such transactions? The mathematicians were called in to assess the risk and probabilities involved, and in turn, out of this grew a new branch of mathematics which led to advanced theories on how the mathematical models should be constructed. Soon, banks and all the other major financial institutions were employing mathematicians, including physicists, as critical members of their strategic teams.

This year, to mark Cork City's celebration of the Capital of Culture title for 2005, the lecture series has been called "The Last Lecture Series" and participants were asked by the organiser, Professor William Reville, of  UCC's Science Faculty, to regard it as an opportunity to deliver a final lecture. So far, the series has attracted packed houses each evening in the Boole complex and subjects have ranged from God and science to mental illness. Next Wednesday's lecture promises to be no less intriguing, and Professor Hanzon has promised to open a window on the world of high finance and the often unknown role that mathematics has played in it.

The lecture will be given in UCC's Boole Lecture Theatre 4 at 8 pm on Wednesday, 5 October. As always, members of the public are invited to attend and admission is free.

120MMcS