Mon­day, March 19, 2012

I arrived at Han­weck Asso­ciates a cou­ple of min­utes before 9 am. Dr. Han­weck intro­duced us to every­one in the office and explained a bit about what his firm does on a day to day basis, although each day is dif­fer­ent and can be unpre­dictable! Shortly after­wards, the big news of Apple announc­ing a div­i­dend pay­out to its share­hold­ers reached the office, so most peo­ple were work­ing on updat­ing the data­bases of option pric­ing infor­ma­tion. After every­one set­tled down into nor­mal work, Wes­ley, the other Princetern, and I talked with Dr. Han­weck and started to ana­lyze his­tor­i­cal data on div­i­dend pay­out dates and amounts. Using Excel, we com­pared the actual dates and amounts to pre­dicted dates and amounts pro­vided by two ven­dors in order to see if the ven­dors were doing a good job. This is impor­tant because Han­weck Asso­ciates buys this div­i­dend pre­dic­tion data from the ven­dors and uses it in their cal­cu­la­tions and mod­els. We worked on this for the rest of the day and decided to switch from Excel to C++ in order to parse the data more effi­ciently. Through­out the after­noon, we got to talk with the asso­ciates in the office and learn more about what projects they were work­ing on – lots of cool stuff all going on at once! At the end of the day, we sum­ma­rized what we found and talked with Dr. Han­weck and Andy before leav­ing the build­ing at 6.

Tues­day, March 20, 2012

On the sec­ond day, we started off by fin­ish­ing up details on the div­i­dend pay­out com­par­isons. We found some inter­est­ing pat­terns and results in the data, so we noted those and passed them on to next per­son who would be using them. After lunch, we started on our sec­ond project with the help of Jeff and Dr. Han­weck. The goal of this project was to build a com­puter pro­gram that approx­i­mates the Hes­ton model option pric­ing equa­tions, using the results of an ear­lier aca­d­e­mic that derived first and sec­ond order approx­i­ma­tion with sto­chas­tic cal­cu­lus. We decided to imple­ment this in Java, and we worked on this till the end of the day. It was def­i­nitely a tough project for us since the equa­tions were pretty com­plex, and the paper was hard to fol­low since we had to grasp some hard math­e­mat­i­cal ideas in order to under­stand the first and sec­ond order approx­i­ma­tions. By the end of the day, we had a func­tion­ing pro­gram that com­plied but gave the wrong numer­i­cal results. We chat­ted with Dr. Han­weck about what his com­pany does and about dif­fer­ent option pric­ing meth­ods before we left the work­place at 6:30.

Wednes­day, March 21, 2012

Ryan, fel­low Princetern Wes­ley, and Dr. Jerry Hanweck

Today, we con­tin­ued to work on the Hes­ton model approx­i­ma­tion. We started off by going through the entire pro­gram to trace what hap­pens at each step and to make sure that we put in all the approx­i­ma­tion for­mula com­po­nents cor­rectly. With some help from Dr. Han­weck and a few oth­ers, we located some bugs in our code and fixed them. Now, our code was get­ting closer to the right num­bers but was still off by about one per­cent. We decided to go for lunch and brain­storm ideas on how to per­form addi­tional test­ing. Since we did not know for sure whether this was caused by bugs in our code or whether this error is inher­ent in the approx­i­ma­tion itself, we decided to look in aca­d­e­mic jour­nals for numer­i­cal data and results done by oth­ers. After lunch, we found some data and com­pared it to our results and saw that we matched their results fairly closely. We fin­ished up the pro­gram by clean­ing up the vari­ables and adding some extra com­ments so that the next per­son who works with this code can bet­ter under­stand what we were doing. It was get­ting close to the end of the day, and I couldn’t believe how fast this Princetern­ship went by! We looked around the work­place and talked with oth­ers to see what they were cur­rently work­ing on. After­wards, we fin­ished the day by chat­ting with Dr. Han­weck about what we had done with the Hes­ton model approx­i­ma­tion project. Over­all, I greatly enjoyed this Princetern­ship and learned a lot through hands-on expe­ri­ence. I was able to apply some of the mate­r­ial I had learned in ORF 335: Finan­cial Math­e­mat­ics, so the prac­ti­cal expe­ri­ence nicely com­ple­mented the the­ory I had learned in the class­room. I would like to thank Dr. Han­weck, Andy, Jeff, and every­one else at Han­weck Asso­ciates who shared their knowl­edge and sto­ries with us. It was a won­der­ful expe­ri­ence, and I am look­ing for­ward to work­ing at a finan­cial firm again.