Stevanovich’s $7 million gift provides home for financial mathematics

The only research center in the nation, if not the world, devoted to financial mathematics has received a $7 million gift from Steve G. Stevanovich, founder of an asset management firm with offices in North America, Europe and Asia.

Founded at the University in August, the research center has been named the Stevanovich Center for Financial Mathematics. A spin-off of the University’s Master’s Program in Financial Mathematics, the center will bring together scholars and finance professionals to address problems faced by the industry.

“World financial markets are becoming more and more complex and mathematics is increasingly becoming an invaluable and necessary tool in understanding these markets,” Stevanovich said. “The financial mathematics program at Chicago is at the forefront of providing students with the necessary tools to filter and decode this complexity. It is an honor for me to be a part of this endeavor and to continue the legacy of excellence at the University.”

Raised in Chicago, Stevanovich received his A.B. in economics from Chicago in 1985 and his M.B.A. from Chicago’s Graduate School of Business in 1990.

“This generous gift from one of the University’s alumni will greatly enhance our ability to achieve our goals in research and teaching in quantitative finance,” said Robert Fefferman, Dean of the Physical Sciences Division and the Max Mason Distinguished Service Professor in Mathematics. “The Stevanovich Center will be devoted to research, but certainly the increased contact between financial practitioners and our faculty members will sharpen the focus of our classroom instruction.”

Part of the Stevanovich gift will be used to renovate the Mathematics and Statistics Building, a three-story red brick structure at 5727 S. University Ave., as the home of the new Stevanovich Center and the University’s financial mathematics program.

In coming years, the Stevanovich Center will offer a regular schedule of conferences and workshops for academicians and industry professionals, said Niels Nygaard, Professor in Mathematics and founding Director of both the new center and the financial mathematics program.

Nygaard said the center also plans to launch a trans-Atlantic collaboration with French universities that have special expertise in applied mathematics. Nygaard is working with Henri Berestycki, a regular visiting scholar from the Ecole des Hautes Etudes en Sciences Sociales (School for Advanced Studies in the Social Sciences) in Paris, to organize an annual financial mathematics conference with a French university. Chicago’s Paris Center would serve as the France venue.

Fefferman and President Zimmer founded the Master’s Program in Financial Mathematics 10 years ago, when they successively served as Chairman of the Mathematics Department in the 1990s.

Approximately 100 students are currently enrolled in the one-year program, which leads to an S.M. in Financial Mathematics. Professors in Mathematics, Statistics and Economics as well as leading professionals in the financial industry comprise the program’s faculty.

The Stevanovich Center will provide students with new research-based insights that will equip them for successful careers in asset management, Nygaard said. Scholars and practitioners at the center will grapple with risk-management issues that pertain to the trade of stocks, bonds, commodities and other financial products. Hedge funds alone comprise a growing industry that tops $1 trillion annually, according to the Hedge Fund Association.

Many hedge funds attempt to guard against downturns in their trading markets by employing options, futures and other strategies, but sometimes they fail. Nygaard said faculty members in Financial Mathematics carefully examine the causes of hedge fund failures. Usually they find that the hedge fund managers have overlooked important elements of risk. “We try to teach people to avoid those pitfalls,” he said.

“You have to look at everything. It’s a very dangerous world out there,” Nygaard said. Even low-probability events must be taken into account. “There are so many hedge funds that some of them are going to be hit by extremely unlikely events. You better be prepared for what you are going to do, if it does happen.”