Fel­low Princetern Ryan, Wes­ley, and Dr. Jerry Hanweck

Day 1

We had just arrived at the office 9 am sharp. The other employ­ees were trick­ling in, but there was already a buzz around the office. Tele­phones rang left and right and Bloomberg ter­mi­nals were under con­stant sur­veil­lance. Mr. Gerry Han­weck ‘87 was on the phone with sev­eral clients to see if they had more information.

Apple had just announced a div­i­dend. How­ever, it was unclear what date they set for the div­i­dend end. Apple options will depend heav­ily on whether Apple goes ex-dividend before or after the expiry date. Han­weck Asso­ciates, which spe­cial­izes in high-computing solu­tions for option traders, pro­vides an accu­rate, reli­able and most impor­tantly, real-time data stream. Div­i­dends are one of the most impor­tant fac­tors in the pric­ing of options, and undoubt­edly they wanted to get the date of Apple’s div­i­dend cor­rect. It could mean a world of dif­fer­ence to the count­less option traders in the world.

After this hec­tic morn­ing, Gerry started us on our first project. As it turns out, it was related to the inci­dent that morn­ing. Han­weck Asso­ciates buys analy­sis from two large firms regard­ing the ex-dividend dates of var­i­ous com­pa­nies. He wanted us to ana­lyze which firm was bet­ter at pre­dict­ing the ex-dividend rate, the yield, and by how much. They then use this data in their own sys­tem to bet­ter pre­dict the prices of options. It was fas­ci­nat­ing to learn what real projects some of their employ­ees might work on. It was also inter­est­ing to learn all the fac­tors that went into the pric­ing of an option. The com­plex­ity of the com­pu­ta­tion process is what led Gerry to start his own firm—by tak­ing advan­tage of the par­al­lel com­put­ing power of graphic pro­cess­ing units, he is able to cal­cu­late valu­able risk fac­tors and stream them to option traders in real time. We worked on this project for the rest of the day.

Day 2 + 3

We fin­ished up our analy­sis of div­i­dend fore­casts by noon and found some inter­est­ing results that we reported to Gerry. It was noth­ing out of the ordi­nary and rein­forced their exist­ing belief. Then, we promptly started on our sec­ond project. Han­weck Asso­ciates uses a well-known math­e­matic model in their com­puter sys­tems to com­pute the fair price of options. It cur­rently employs a sophis­ti­cated algo­rithm known as the Fast Fourier Analy­sis. Gerry wanted us to code another approx­i­ma­tion algo­rithm based on this model. Our algo­rithm would be sim­pler, and thus would take less com­pu­ta­tion speed. This is cru­cial for Han­weck Asso­ciates because they pride them­selves on stream­ing their data in a mat­ter of mil­lisec­onds. How­ever, our algo­rithm would pro­vide less accu­rate results. Gerry wanted us to inves­ti­gate exactly how much accu­racy is lost through this faster approx­i­ma­tion algorithm.

This project seemed very dif­fi­cult at first; the paper con­tain­ing the work related to the approx­i­ma­tion algo­rithm was nearly inscrutable. How­ever, with the guid­ance of another employee, we were able to quickly pro­ceed in our code. This project also allowed me to uti­lize what I had learned in my classes such as Prob­a­bil­ity The­ory in a prac­ti­cal envi­ron­ment. In the end, we were unable to fin­ish the algo­rithm com­pletely in the short time that we had, but I still learned a lot of from the expe­ri­ence and am extremely grate­ful for this won­der­ful oppor­tu­nity that Gerry pro­vided us.