Scott Treloar

Director, Head of Methodology & Models, Deutsche Bank Corporate and Investment Banking, Singapore, Australian, 45

Could you tell us about your background?

After graduating in chemical engineering from the University of Melbourne, I worked for three years in this field in Australia and then transferred to Austria where I also worked for three years… as a ski instructor. I figured out that the latter was probably not a viable full-time career option for me and returned to Australia to do an MBA in Melbourne.

Upon graduation, I joined Macquarie Bank and worked for five years in investment banking – capital raising and mergers and acquisitions, primarily in the technology sector. When the technology bubble burst, I had an opportunity to work in project finance or tax structuring but I preferred to leave and join a private equity company, by the name of Committed Capital. At the same time I strengthened my finance background with a Master in Quantitative Finance from University of Technology, Sydney. Then we had our first son and, my wife being Singaporean, we decided to relocate to Singapore to be closer to her family. This is when I joined Deutsche Bank, where I have worked for the past seven years. I run a team of analysts that looks at the valuation, modelling, and model calibration of the bank’s derivatives across Asia-Pacific.

You seem to be doing fine in an interesting position, why did you embark on a PhD?

Call this a commitment to lifelong learning; as an engineer at heart, I have always tried to understand how things work. I became fascinated with the field of quantitative finance during my Master’s. As I wanted to understand things at a more fundamental level, I was spending a lot of time reading finance articles. But with the field being so deep and diverse, I was barely scratching the surface. There is only so much you can learn by yourself and it is especially difficult to tell what is important and current from what is not; I needed the type of structured learning experience a doctoral programme offers.

Why the EDHEC-Risk Institute PhD in Finance?

Regarding the choice of finance, as Professor Andrew Lo observed in a recent paper, MIT mints hundreds of new engineering, physics, or mathematics PhDs every year, but only a handful of finance PhDs. Of course, going for a programme that is completely focused on finance like that at EDHEC is not only a question of scarcity, it is also a question of relevance. There are many people in finance with qualifications in the hard sciences. But I am not convinced this is sufficient to adequately address many of today’s finance challenges. Having a proper grounding in finance theory, markets, and products enables "quants" to create real value for their institution and more broadly.

As for the choice of EDHEC-Risk Institute, I was not particularly interested in programmes that primarily cater to training future professors. The Institute’s doctoral programme primarily targets practitioners who want to stay in the industry and has a more applied dimension than these traditional courses, so it was easier for me to see how I would leverage my investment.

Has the programme met your expectations to date?

Yes, it has been very useful to approach finance in a structured way. I have been exposed to a body of knowledge which, for the most part, was completely unknown to me. Even when you have done an advanced master’s degree in finance, you lack a lot of depth, not to mention breadth.

In addition, the faculty brings together really strong and globally prominent scholars, many of whom also have strong links to the finance industry.

You are about to start your third year in the programme – what has been your policy with respect to electives?

I have attended all electives offered to my class and have also used the online platform to view those from past years. These electives are great not only because the faculty is outstanding but also because each professor covers one of his areas of expertise and ongoing research: you get the faculty’s insights on what is key and what is not and that helps tremendously to structure your learning and research. You also get an advanced preview of where each field is going. I am looking forward to taking the electives offered in Singapore next year, but will also be going to Europe for the credit modelling and empirical option pricing courses given by Rama Cont and Mikhail Chernov in January.

Do you recall any particularly pleasant experience?

I very much enjoyed Frank Diebold’s course on yield curve models as it was directly relevant to my dissertation work. The same goes with Yacine Aït Sahalia’s course on the econometrics of jumps and Nicholas Polson’s elective on Bayesian learning and filtering.

Speaking of which, what is the focus of your dissertation?

My dissertation work looks at the dynamics of Asian yield curves; I am trying to extract and understand the factors driving the term structure of interest rates in the region. I am extending some of the work done on the US market using a proprietary dataset encompassing ten years of historical swap rates. In authentic scientific style, the "anomalies" and unusual factors that come out of this analysis will largely dictate the direction of my further work in the area.

I am also looking at the possibility of trading the residual risk in the yield curve, i.e. the part that is left after hedging for the identified driving factors. Since I identify some amount of mean reversion in this residual risk, the obvious practical question is whether this is economically significant once the bid-ask spread is taken into account.

I am also considering extending my work to interest rate volatility modelling using data from caps, floors, and swaptions.

All of these are close to my work, which explains why Deutsche Bank supports me in this endeavour.

Who is your supervisor and how do you work with him?

My supervisor is Robert Kimmel, a member of the core faculty who is a specialist of yield curve modelling, estimation, and stochastic volatility modelling. He has done a lot of work with Yacine Aït Sahalia that is directly relevant to my dissertation.

I work fairly independently; like most students in this programme I am responsible and do not need to be held by the hand. There are three main areas in which I use his support. First, I discuss what I am doing and he gives me pointers, describing the landscape and indicating the landmark papers, redirecting me when needed. Second, he gives me feedback and comments on what I write or present. On both counts, it is particularly helpful that he is an expert in the field I am researching. Last but not least, he advises me on how to present my research to meet the expectations of academic editors, which may not be obvious to a practitioner.

What is your view of the class?

This is a well balanced mix of individuals with different knowledge bases, fields of interest, and expertises. You find people from across the industry: investment bankers like me, asset and hedge fund managers, private bankers, etc.

They ask a lot of questions, which helps a lot, even during the workshops at which researchers present their ongoing work.

We also meet outside the classroom when we are in the same city, which contributes to creating a community.

Who do you think this programme is for?

The programme is about transferring academic knowledge and insights to industry. This is an innovative, brave and valuable concept. It is for those professionals who want to build their technical and research skills to strengthen their organisations as well as for their own fulfilment.