Wesley Cao ’15, Hanweck Associates, LLC

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.