Derivatives Models on Models

Eduardo Schwartz: The Yoga Master of Mathematical Finance

Eduardo Schwartz is Professor in Finance at UCLA Anderson School of Management. He has published more than 90 articles in finance and economic journals. He was one of the first to apply finite difference to option valuation, and was also a pioneer in real option valuation as well as in developing models for commodity derivatives. More recently he has done some interesting work on asset allocation and portfolio optimizing under fat-tails.

Haug : Where did you grow up?

Schwartz: I was born and grew up in Santiago, Chile.

Haug : How and when did you first become interested in finance, economics and mathematics?

Schwartz: I became interested in mathematics and economics while I was studying Engineering in Chile. I became interested in finance when I went to Vancouver to get a Masters degree.

Haug : What is your educational background?

Schwartz: I have an Engineering degree from the University of Chile (a six year course) and Masters and PhD in Finance from the University of British Columbia in Vancouver.

Haug : How and when did you first become interested in applying finite difference methods to valuation of derivatives instruments?

Schwartz: Michael Brennan and I realized that there were many interesting options problems that did not have closed formed solution, so I wrote part of my PhD dissertation developing these numerical methods to value derivative instruments.

Haug : Was it clear early on for you that binomial and trinomial ...