{"id":5037,"date":"2021-02-01T17:41:36","date_gmt":"2021-02-01T16:41:36","guid":{"rendered":"https:\/\/blogs.mathworks.com\/student-lounge\/?p=5037"},"modified":"2021-02-01T17:41:36","modified_gmt":"2021-02-01T16:41:36","slug":"prmia-risk-management-challenge-2020-going-virtual-in-a-risky-challenge","status":"publish","type":"post","link":"https:\/\/blogs.mathworks.com\/student-lounge\/2021\/02\/01\/prmia-risk-management-challenge-2020-going-virtual-in-a-risky-challenge\/","title":{"rendered":"PRMIA Risk Management Challenge 2020: Going Virtual in a RISKY Challenge"},"content":{"rendered":"<p>Today\u2019s guest blogger is <strong>John Elhilow<\/strong>, who\u2019s here to share the results of the 2020 <a href=\"https:\/\/prmia.org\/PRMIAInstitute\/Our_Projects\/Risk%20Management%20Challenge.aspx\">PRMIA Risk Management Challenge<\/a> and to encourage University students to participate in the 2021 challenge! Learn more about the competition <a href=\"https:\/\/www.mathworks.com\/academia\/student-competitions\/prmia-risk-management-challenge.html?s_tid=srchtitle\">here<\/a>, where participating Teams can also apply for complimentary software.<\/p>\n<h1>Going Virtual in a RISKY Challenge<\/h1>\n<p>For many students, a successful transition from school to\u00a0their\u00a0chosen career\u00a0depends on their ability to take what they\u2019ve learned from their coursework and apply it to real-life situations.\u00a0The\u00a0<a href=\"https:\/\/www.prmia.org\/\">Professional Risk Managers\u2019 International Association\u00a0(PRMIA)\u00a0<\/a>believes this is such a vital skill, they have created an\u00a0internationally renowned\u00a0Risk Management Challenge based on applying\u00a0risk management\u00a0theory to the workplace.\u00a0The\u00a0Challenge\u00a0gives risk and finance students the experience of using critical thinking and problem-solving skills around a real-life case study.\u00a0Current undergraduate and graduate students from\u00a0universities\u00a0around the world form teams of three or four\u00a0to compete\u00a0in\u00a0the Challenge\u2019s three rounds of competition.<\/p>\n<p>Due to disruptions caused by COVID-19, in 2020, the Risk Management\u00a0Challenge\u00a0had to be modified\u00a0for its regional and final rounds. As teams and chapters faced\u00a0challenges\u00a0with traveling and hosting in-person events, PRMIA decided to follow the\u00a0competition\u00a0through to the end and host the events virtually.\u00a0Some\u00a0chapters\u00a0hosted\u00a0their regional competitions\u00a0on Zoom\u00a0or Google Meet, while others had participants submit pre-recorded video presentations that were judged\u00a0offline.<\/p>\n<p>Over the course of several months,\u00a0in-person and online,\u00a0the\u00a0PRMIA\u00a0Risk Management Challenge used a real-life simulation to give its student participants practical experience and an edge in job interviews and real-life employment.\u00a0It will also help\u00a0develop\u00a0future leaders in the risk industry.\u00a0The final round on April 20, 2020, was hosted entirely on Zoom, with team presentations in the morning\u00a0followed by\u00a0career panel discussions, finalist presentations, and\u00a0the\u00a0announcement of\u00a0the winning team in the afternoon.<\/p>\n<p>The above excerpt regarding the 2020 PRMIA Risk Management Challenge reprinted with permission of Association North, previously featured in the May\/June 2020 issue of <em>Focus North.<\/em><\/p>\n<p>Highlights of the 2020 PRMIA Risk Management Challenge can be viewed below:<\/p>\n<p><iframe loading=\"lazy\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/lnJnEp1ByLQ?start=2&#038;feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe><\/p>\n<h1>The Virtual MATLAB Challenge<\/h1>\n<p>As part of the PRMIA Risk Management\u00a0Challenge, teams were also provided with the opportunity to compete in a MATLAB Challenge. The MATLAB Challenge was selected to complement the\u00a0Long-Term\u00a0Capital Management\u00a0(LTCM)\u00a0case with a\u00a0hands-on\u00a0application\u00a0of\u00a0<a title=\"https:\/\/www.mathworks.com\/videos\/cointegration-and-pairs-trading-with-econometrics-toolbox-81799.html (link no longer works)\">pairs trading<\/a>.\u00a0 The MATLAB product team provided students with a reference example of developing a trading strategy between Brent Crude Oil and West Texas Intermediate using\u00a0<a href=\"https:\/\/www.mathworks.com\/discovery\/cointegration.html\">cointegration<\/a>\u00a0as\u00a0the\u00a0measure for how\u00a0the\u00a0two oil prices changed in relationship to each other over time.\u00a0 This\u00a0reference example provided the recipe for students\u00a0to understand how to program and apply the trading strategy within MATLAB\u00a0in the short time frame they had to compete.<\/p>\n<p>The\u00a0real part of the\u00a0challenge for the competition teams was\u00a0to develop their own pairs trading strategy\u00a0by selecting stocks from the constituents of S&amp;P500 index.\u00a0 Students were free to develop a single pairs trading strategy or a portfolio of pairs trading strategies using cointegration or any other measure they chose, such as correlation\u00a0in any tool of their choice (MATLAB, R, Python, and Excel\u00a0were used by different teams).<\/p>\n<p>Evaluation of their solution was based upon a written document or\u00a0a\u00a0presentation\u00a0document\u00a0describing their rationale for selection of the trading strategy along with\u00a0in and out of sample\u00a0backtested performance\u00a0with\u00a0risk measures of their choosing.\u00a0 They were also tasked with assessing the market and liquidity risk their strategy was exposed to and how their strategy was similar or different to what LTCM experienced.<\/p>\n<p>Overall,\u00a020 teams participated in the MATLAB Challenge\u00a0and submitted\u00a0high-quality challenge solutions.\u00a0 The MATLAB Challenge was\u00a0also\u00a0used as a\u00a0tie-breaker\u00a0during the regional rounds to select teams for the final round.\u00a0 12 teams\u00a0made it to the final round where the MATLAB Challenge winners were scored across dimensions of presentation, analytical rigor, selection of risk measures, and overall trading performance\u00a0with a maximum score of 100. The top\u00a03\u00a0placed teams\u00a0were:<\/p>\n<ul>\n<li><strong>1st Place\u202f &#8211;\u202f\u202fTeam 9893, Baruch College (100 points)<\/strong><\/li>\n<li><strong>2nd Place\u202f &#8211;\u202f Risky Toronto, University of Toronto (85 points)<\/strong><\/li>\n<li><strong>Tie for 3rd Place\u202f &#8211;\u202f Morpheus, Rutgers University, and UNB MQIM-2020, University of New Brunswick (tied at\u00a080 points)<\/strong><\/li>\n<\/ul>\n<p>Team 9893 won the challenge with a perfect score.\u00a0\u00a0Team 9893\u00a0team\u2019s\u00a0code is on\u00a0<a href=\"https:\/\/github.com\/Lyle-C\/modified_pairs_trading\">github<\/a>\u00a0\u00a0and\u00a0images\u00a0from their presentation\u00a0are\u00a0shown below\u00a0for their back test performance.\u00a0 As can be seen in their presentation slides below, the performance of their strategy\u00a0had an annualized return of 12.3%.<\/p>\n<p><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter wp-image-5041 size-full\" src=\"https:\/\/blogs.mathworks.com\/racing-lounge\/files\/2021\/02\/PRMIA-Blog-Pic-1-e1612197371707.png\" alt=\"\" width=\"500\" height=\"281\" \/><\/p>\n<p><img decoding=\"async\" loading=\"lazy\" class=\"aligncenter wp-image-5039 size-full\" src=\"https:\/\/blogs.mathworks.com\/racing-lounge\/files\/2021\/02\/PRMIA-Blog-Pic-2-e1612197391118.png\" alt=\"\" width=\"500\" height=\"281\" \/><\/p>\n<p><em><strong>Watch the Finals of the 2020 PRMIA Risk Management Challenge below:<\/strong><\/em><\/p>\n<p><iframe loading=\"lazy\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/AenyI5M0PCU?start=1&#038;feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe><\/p>\n<h1>What the Winners are saying!<\/h1>\n<p>We were able to receive insight from students of two of the top Teams in the competition, Team 9893 and Team Morpheus. Read more of their approach to the competition, how they used MATLAB, and their key takeaways from their participation in the PRMIA Risk Management Challenge below:<\/p>\n<p><strong>Team 9893, Baruch College<\/strong><\/p>\n<p>1<sup>st<\/sup> place winners, Team 9893, used MATLAB to simulate their trading strategy, and used teamwork to come out on top in the competition. They approached the challenge questions in a collaborative method, discussing the questions as a Team first before drafting answers to those questions separately, and then the Team came together to finalize their answer. The Team stated that the competition was a good opportunity for them to apply what they\u2019ve learned into solving practical problems in the industry, and that the quantitative skills used in the competition would be helpful for most professional roles that they would pursue.<\/p>\n<p><strong>Team Morpheus, Rutgers University<\/strong><\/p>\n<p>3<sup>rd<\/sup> place winners, Team Morpheus, used MATLAB for financial modelling and numerical analysis, which allowed them to perform matrix computation seamlessly. Also using teamwork to their advantage, the Team divided into roles that were based on their expertise, knowledge areas, technical skills and soft skills. MATLAB helped the Team to perform very intricate codes in an easy way when there were many transformations involved in the computation. The Team stated that the competition was a good opportunity for them to learn about risk analysis and how certain companies\u2019 risk becomes systematic in nature, as well as showed them the importance of having a quanta-mental approach to finance world.<\/p>\n","protected":false},"excerpt":{"rendered":"<div class=\"overview-image\"><img src=\"https:\/\/blogs.mathworks.com\/student-lounge\/files\/2021\/02\/PRMIA-Blog-Pic-2-e1612197391118.png\" class=\"img-responsive attachment-post-thumbnail size-post-thumbnail wp-post-image\" alt=\"\" decoding=\"async\" loading=\"lazy\" \/><\/div>\n<p>Today\u2019s guest blogger is John Elhilow, who\u2019s here to share the results of the 2020 PRMIA Risk Management Challenge and to encourage University students to participate in the 2021 challenge! Learn&#8230; <a class=\"read-more\" href=\"https:\/\/blogs.mathworks.com\/student-lounge\/2021\/02\/01\/prmia-risk-management-challenge-2020-going-virtual-in-a-risky-challenge\/\">read more >><\/a><\/p>\n","protected":false},"author":174,"featured_media":5039,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[6,13],"tags":[465,455,459,461,463,457,469,467],"_links":{"self":[{"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/posts\/5037"}],"collection":[{"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/users\/174"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/comments?post=5037"}],"version-history":[{"count":10,"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/posts\/5037\/revisions"}],"predecessor-version":[{"id":5252,"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/posts\/5037\/revisions\/5252"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/media\/5039"}],"wp:attachment":[{"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/media?parent=5037"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/categories?post=5037"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.mathworks.com\/student-lounge\/wp-json\/wp\/v2\/tags?post=5037"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}