New Series- “Meet our Financial Math Alumni”- Coffee Chat with Jonathan Leonardelli

"Meet our Financial Math Alumni" is an up-close interview series with select Financial Math alumni to learn more about their career, experience and knowledge after receiving their Masters in Financial Math degree from NC State University. Alumni are important part of our program for many reasons. They provide support, vision and strategy to ensure the success of our program. They are role models and mentors for current students. They strengthen the reputation of the Financial Math program. They provide job leads and recruitment activity for students. Our alumni are intelligent and awesome! Thank you to those who participant in this series"- Leslie Bowman, Director of Career Services


Meet Jonathan Leonardelli, FRM, Risk Consultant (Graduated 2004)


Interview conducted and summarized by Yi Chao and Xiaohong Chen, Financial Math Interns, May 2015 Graduates

Jonathan is currently a Risk Consultant at Financial Risk Group. He is also one of the first students to graduate from NCSU’s Financial Mathematics program. We were honored to have the opportunity to interview him.

Part I: Education & Job Background

1) Interviewer: Why did you decide to get a Masters in Financial Math at NC State?

Jonathan: I had just moved here and was interested in changing careers. I wanted to find a program that combined mathematics and finance. As it happened, NC State was in the process of creating the Financial Mathematics program. Although the start of the program was still a couple years off, that time allowed me to get the necessary mathematics background I needed. Entering the program produced the exact result that I wanted: it gave the mathematics I need to do interesting work in the banking industry.

2) Interviewer: How did the program prepare you for your job?

Jonathan: The program really gave me the depth of math that I needed to work in the field of risk. It also taught me how to apply rigorous logic to a problem to help find a solution. Beyond this, though, I learned that life was filled with randomness. This randomness, as a result, causes the quantification of some metrics to be difficult.


Part II: Analytic techniques

3) Interviewer: "Big Data" is a hot specialization in the field. Do you see this as long term trend or something that might pass as a fad?

Jonathan: It is definitely not a fad. In this day and age many actions we take, especially when using a piece of technology, is probably captured and stored in some database. Now, think about all those action and all the data that comes along with it. What is a company going to do with this data? They are going to improve their sales, improve their risk practice…the list goes on. Having skills to work with big data, to be able to find the relevant information and then integrate it into a model, is very useful.

4) Interviewer: The trend of “Big Data” implies that historical data can shed some lights on future prediction. However, this contradicts with “efficient market theory” to some degree. What are your thoughts about this?

Jonathan: I think concerns should always be involved when using historical data because the tacit assumption is that the future is going to behave like the past. That being said, there are ways to mitigate these concerns. For example, when we calibrate models one of the first things we do is test it with a different period of data to see if the model is robust. Sometimes we might use the model on data representative of a stressed scenario (i.e., a scenario that is uncommon but still possible) and see how the model performs. If it performs badly, we try to assess why that is. Are the parameter estimates wrong? Are different variables needed?

5) Interviewer: Does your company use stochastic models to predict interest rate? What kind of models are used?

Jonathan: To be honest, in my current job the main stochastic (i.e., diffusion based) models I have used are CIR (Cox-Ingersoll-Ross) and GBM (Geometric Brownian Motion) with the occasional jump-diffusion model thrown into the mix. Most of the models I have worked with recently are linear regression, logistic regression, and Markov chains.

6) Interviewer: In your area of specialization, what is your favorite method or model and why? Do you believe it is perfect?

Jonathan: Markov chains and their resulting transition matrices. This comes from the years when I worked in the banking industry. At a glance, the transition matrix tells you the behavior of different segments of accounts. Depending on how the states of the Markov chain are defined, the transition matrix can tell you: 1) The probability of going to default, 2) the probability of paying off, 3) the probability of curing, 4) the probability of moving across multiple states over a given time, etc.

The transition matrix is a great summary tool. Of course, it is not perfect. Always keep that in mind when you build a model. Even though the model looks pretty and deals well with the data – now – it is not perfect. It is an easy move from complacency, when the model is performing well during good times, to anxiety when the model is performing poorly during a financial crisis.


Part III: Risk Management

7) Interviewer: How do the regulation policies enacted after crisis affect the behavior of your company?

Jonathan: The regulations have not impacted the behavior of our company. However as a risk consulting company, we have seen more requests from financial institutions asking us to help them comply with the regulations.

8) Interviewer: The goal of risk management is to achieve a balance between returns and risks. Thus, with a lot of capital and human resource spent, risk management may, to some extent, reduce a company’s profits. Driven by the motivation of maximizing the profits, will the companies pay enough attention for risk management?

Jonathan: I may be biased, given my chosen career path, but I think with the recent financial crisis still fresh in our memories as well as all the regulations that were created as a result of it, businesses will continue to pay enough attention to risk management. And, I think, it will be that way for a while.

Part IV: Suggestions & Advice

9) Interviewer: Any tips for those interested in getting into the field?

Jonathan: First, be comfortable with the idea of randomness. Randomness is uncertainty and uncertainty is risk. Second, companies do not only seek candidates that are good at math and programming. They also seek those candidates who can clearly present their ideas in writing and presentations. Third, get perspective from areas outside of mathematics. I strongly suggest taking business classes because it gives you a different view of a business. A company is multifaceted and does not solely revolve around models.

10) Interviewer: What courses do you recommend?

Jonathan: The courses in the Financial Math program are very good. Among them, I definitely think the probability course is the most important one. That course takes you deep into the world of randomness and, hopefully, makes you comfortable with it. If you have an option of taking a course on risk or financial regulation that would be good. I took econometrics as an elective and, more often than not, draw upon the math tools I learned from that class more than others. Another very good course I took, and have used frequently, is time series analysis.


"It is a great experience to interview Jonathan. He is humorous and smart. We learned a lot when we talked with him. Thanks Jonathan for participating in our interview! We are sure that your answers will shed some light for those interested in Financial Mathematics!"- Yi Chao and Xiaohong Chen


These students made it through the rigorous Financial Math program at NC State


(Left to Right- Xue Miao, Xinyuan Huang, Director- Jeff Scroggs, Director of Career Services- Leslie Bowman, Zhe Wang, Zhexing Zhang, Meenakshi Ramchurn, Sohaila Shaukat). Not pictured- Rana Kashif, Haozhi Wei, Zhengran Zhou, Samuel Busch, Kathy Varga, Xiangju Wang, Cheng Yu, Shihao Zuo, Meng Yang, Wen Zhong, Ying Xu)

The students (pictured above) proudly graduated on May 9, 2014 and received their Masters in Financial Mathematics (MFM) degree. They are excited and happy to achieve this meaningful accomplishment. Their hard work and long hours of studying paid off!

Sohaila Shaukat shares more details:

What was the most rewarding assignment or project of the program?
"The most rewarding project of the program was the one we did on asset pricing in 'Computational Methods in Economics and Finance' course. The project solidified my interest in derivative pricing and helped me build on what I had previously learned in Monte Carlo Methods for Financial Mathematics and Asset Pricing. Also, this added a lot to my resume, as employers are constantly seeking people who can build financial models and have a little bit of experience in it. It was also the reason I landed with an internship over the summer with Tata Consultancy Services."
What was the most interesting or favorite course and why?
"Most of the courses were rewarding. But my two most favorite courses are 'Computational Methods in Economics and Finance' and 'Time Series Analysis'. Both are difficult courses with brilliant professors, and helped me enhance my skills in data modeling, derivatives pricing and financial modeling. These courses also introduced me to R-programming and enhanced my skills in Matlab."
How many hours a week did you spend studying (on average)?
"I studied 20 to 30 hours per week on average. 20, when we didn't have to submit assignments in every course, and 30 or more usually when exam week/ mid terms are near."
Anything you would have done differently throughout your time here?
"I would have worked harder on the courses that involved a lot of Statistics and Stochastic Calculus. Since I had a non-mathematics background, I should have spent a lot more time on them. Also, I would have started applying for full time positions in July, 2013, instead of delaying it till January, 2014. This is because most major banking/wealth management firms hire their graduate trainees between July to December."
Sohaila's hard work paid off since she had several interviews and received a job offer. Look forward to a future post about her story.


(Xinyaun Huang, Xue Miao, Zhe Wang, Zhexing Zhang)


(Sohaila Shaukat, Director, Jeff Scroggs, Meenaski Ramchurn)


(Time to celebrate!)

We congratulate them and wish many, many years of success!

To learn more about the program: Financial Math program details