Ryan Peng ’14, Hanweck Associates

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.