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Women in Quantitative Finance #2 - Interview with Dr Lisa Borland

Fri, 10 May 2013 10:35:00 GMT

Following our interview with Carol Alexander earlier in the year, in the second in our series on Women in Quantitative Finance, MoneyScience was delighted to get the chance to talk to Dr Lisa Borland, who has 15 years experience in working in quantitative hedge funds.

After completing her PhD in Theoretical Physics at the University of Stuttgart, Lisa went on to become Head of Derivatives Research at Evnine & Associates, Inc., a San Francisco based quantitative hedge fund, where she developed equity and options trading strategies. She then spent two years as Head of Research and Trading at Cogence Capital, a small High Frequency Forex Fund and went on to became Managing Director of Execution Services at FX Trading Systems firm, Integral Development Corporation. At present she is a Senior Investment Professional at T2AM where she is responsible for research and manager due diligence.

Lisa is a Member of the MoneyScience Advisory Panel, and also sits on the Advisory Committee for the Quant Finance Section of the arXiv Preprint Server.


Jacob Bettany: Thank you very much for joining me Lisa. Can you start by telling us a little bit about your background in physics and how you came to choose finance as a career?

Lisa Borland: Sure. I did my PHD in theoretical physics with Hermann Haken in Stuttgart who’s famous for models of understanding the dynamics of complex systems. At some point you can extract the dynamics from the actual physical system and apply it to pretty much anything so the natural next step is then to ask, what is the most complex system really?

I felt that human interaction and price formation is a good example, so from physics it was kind of natural to move in this direction. Plus I spent 2 years doing post-doctoral work in Brazil with Constantino Tsallis where we were working on understanding the dynamics of systems with long range interactions and memory and so forth. It just seemed like the stochastic properties that we were looking at and getting to these types of systems had so many properties that seemed to map so well onto what we were seeing in financial data, it just seemed like the perfect niche.

JB: So it was an accident, in that it was a chance encounter with these financial data sets?

LB: Well, it happened because I was working on stochastic equations of different forms. Every time I would give a talk at a conference people would say that I should apply that to financial data. But at that time I wasn't really so interested, initially, in financial data. It was only when I was in Brazil, working with all these fat tail models and so forth, that I started looking more closely. Also the field of econophysics had just started coming and people were connecting financial time series data with interesting complex systems models at that time. So reading papers that were beginning to appear in physics literature it became obvious that there was a link or a good match. It was around this time I wanted to move back to San Francisco for personal reasons and that's when I began working at EVA.

JB: So you started out right from the beginning at EVA without ever having actually worked in a financial environment before. Was that a bit of shock going from academia to a hedge fund?

LB: Not really, in fact one reason I think they hired me was because I didn't have the background so no pre-conceived ideas or notions, I could just come in with a fresh mind and look at things. I just loved it. The main thing that was more exciting than academia was that people actually cared. People were very engaged and interested, and because it was a small company, there was excellent teamwork and great communication. I just felt more alive actually than writing a physics paper where no one seems to really care, except for maybe ten people. It's just much more connected with reality.

JB: But at the beginning of your career you were passionate about physics, right?

LB: I was, and the thing about Physics is, when I started out I never thought about what I was going to study, I never thought about money or making money I just wanted to understand the truth of being. I think that's the idealism of youth, and I thought initially that physics would give me the answers. But what I realised is that we don't have the answers, we just have models. It's remarkable that we've been able to create these models and use them as well as we can but they are still models and we can't equate them with the truth, in a philosophical sense. So it was kind of easy to move in the direction of doing physics from the philosophical point of view to the more practical point of view, because everything I learnt in physics was exciting in its own right and enjoyable to transfer to something like finance.

Then, strangely, it became very similar to physics in the sense that you were still trying to understand dynamics and trying to create models, just not for the pure purpose of understanding the origins of the universe but rather for understanding the origins of a particular complex system. That was very exciting and challenging because you can't run experiments in finance, but from that point of view it was a good transition.

JB: When you went to work at EVA can you give us an idea of what your day to day life was like and what kind of work you were doing, the quantitative aspects of that and how you've moved on in your career since then?

LB: When I first started at EVA it was owned by the same people as IRIS Financial Engineering which was a larger technology company and EVA was essentially a project at that company where I went to work. So I started off doing C++ programming and the first thing I worked on was designing and implementing regime change algorithms which we used in various applications at the hedge fund. But shortly after I got there I became interested in developing an equation for the dynamics of the stock prices and I proposed to Jeremy, the CEO, that I had this non-linear feedback equation and I wanted to apply it and maybe see if I could solve our option prices.

"When I started out I never thought about what I was going to study, I never thought about money or making money I just wanted to understand the truth of being. I think that's the idealism of youth, and I thought initially that physics would give me the answers. But what I realised is that we don't have the answers, we just have models. It's remarkable that we've been able to create these models and use them as well as we can but they are still models and we can't equate them with the truth, in a philosophical sense..."

Although it had nothing directly to do with the bottom line of the company at the time, he allowed me to spend 10% of my time doing that and managing all the different aspects of our statistical arbitrage strategy with the rest of the team.

After a while the options thing began to consume more and more of my time and Jeremy was more and more interested so he let me pursue it and we published it. In fact, we had collaborations with a number of people so for instance I worked with Jean Philippe Bouchaud who came to visit several times. We developed two option strategies based on that model and which we traded until we closed the company.

So day to day work varied a lot from programming, quantitative academic work and then implementing that and using it to figure out what kind of trading strategy we can get based on some of these ideas and implementing that. I wore many hats, especially at such a small hedge fund you don't just do one thing, so the day to day work is anything from solving math equations to debating about macro-economic potential risk factors - even though that wasn't part of our strategy - but the whole spectrum basically.

JB: And how has your role changed since then? You've obviously moved into management for a while but EVA sounds like a bit of an ideal environment is that something you've been able to maintain in other places?

LB: It's true, EVA was a great environment. I also ended up having collaborations with Stanford; I was involved in teaching a projects course there for four years which was great. EVA was a great mix of academic endeavours and the real world. Slightly before we closed, I had already started consulting with a group of people who wanted to get into high frequency foreign exchange trading and I'd never worked in that space before. That was essentially me and one other person so I was the Quant and would come up with the models and he would be more in charge of plumbing the programming, quick access to data and so forth.

That's a very interesting market because it's Over-The-Counter so there's no market place like the New York Stock Exchange, there's no one central limit order book - there are some quasi order books but it's more quote driven - so just from an academic point of view, trying to understand that market was fascinating.

Lisa Borland Presenting on 'Fat-Tails and the Physics of Financial Markets'

It was really fun and I enjoyed being just a two-man shop where we had great interaction with each other and came up with something from scratch, implemented it and saw it run and work. In fact it worked quite well, our strategy, the only thing was that it worked well enough to pay our salaries but we didn't think it could really scale, and the people who invested in the company really wanted something that could scale. The strategy we developed worked well for rather small ticket sizes -between 1 and 5 million dollars a pop. The capacity of the strategy was kind of limited but I learnt a lot about that market which is why I was then asked to become the managing director of execution at Integral FX which is a large technology company that is extremely interesting and fast- growing company that facilitates OTC Trading in electronic markets.

I did that for about maybe 8 months but in the end, and perhaps here we come to a gender issue, it was too taxing on my youngest child because I had to commute two hours each way so you can imagine she had to get dropped off really early at school or at a nannies house. So I'd take her to school, and then I would come home late, like at 7, and it just wasn't working. So I preferred to give up that job. I'm still involved with them, consulting on a project with a PHD student at Stanford because there were so many interesting things to do there, I just couldn't do it in that form. I've been balancing a small bit of time managing that with working full time for a small group of funds based in Los Angeles , trying to find a balance that works for my family.

JB: There's a preponderance of men in Physics, and there's a preponderance of men in Finance. Why do you think that is?

LB: You know it's hard, I honestly couldn't say why. I think in general there are fewer women who go into maybe a field like physics or maths and I guess in finance, quantitative finance, maybe it's the same reasons. Perhaps they are afraid, culturally or socially or whatever, and never really wanted to dive into the mathematical side of things, maybe? When I lived in Brazil there were lots of women in Physics but I think it's really some sort of strange cultural element that's hard to pinpoint.

JB: And in general, in your experience have you met many other female quants?

LB: No I really haven't, I mean there just aren't that many, it's predominantly men. When you go to these finance conferences it's predominantly men, you're often the only woman and you're lucky if there's one other who you then bond with. I do think that pursuing a career in Finance can be stressful because you work long hours. When I was doing the trading in the high frequency space it was literally around the clock, so basically I worked around the clock, I barely slept it was very patchworky. I think if you have a family, or if you have children, it might be hard to pursue unless you have a really great partner who can help on the fringes with the kids and so forth. But I think still in today's age the men typically have an easier time going off and working late or odd hours and women typically are more bound to being around for the kids. So that might be one reason why there are fewer women who actually pursue the career and are in it for the long run.

Selected Research by Lisa Borland

JB: Yes, there does seem to be a cultural aspect. The question is, are women not welcome in finance? Are women treated differently do you think?

LB: I don't think they are treated differently, I think more women would be very welcome actually, but my experience is here on the west coast where it's much more laid back. I can tell you honestly that I don't think they'd be treated differently here. Perhaps, on the other hand, working in New York or London at a more cut-throat place, where people are very competitive...

JB: And where it's much more of a male dominated culture?

LB: Yes, where it's a more male-dominated corporate culture I can imagine that maybe women would be treated differently, I've always avoided such places (the traditional corporate culture, I mean)! I've never felt that I've been treated differently because I've never put myself in a situation. Or maybe I have but haven't noticed it!

I really think it's more me, my personality and where I come from. I never really batted an eyelid that I was the only woman in Physics, for example in Stuttgart. Now in quantitative finance, true there aren't many women but I personally haven't had any issues with it. I mean, maybe I have been discriminated against, maybe I would have been offered much bigger positions, maybe it would have been easier to climb the corporate ladder… it might be the case that people take you more seriously if you look the part more. But how can I know that? I've always tried to be more true to myself and what I want to do, and be good at that, more than climbing the corporate ladder. As I told you I had a great position at Integral but chose to leave it because obviously some things are more important to me. I've never felt like I've had to fight against men to get a job, or maybe fight harder, I've not felt that.

JB: Do you have any advice for young women who are considering entering or beginning their careers in Quantitative Finance?

LB: Go girl, don't even think twice, just go for it! Don't feel inferior and don't think you can't do it. If you want to do it just do it. The main consideration is that you have to stand up for yourself if you do get pregnant or have a child. For example I'm thinking now of a young woman who was at Integral, not really finance but in the business world and had recently had her first child and felt awkward about having to breastfeed and pump milk and leave work early in order to pick up her child from daycare, and so forth. She felt very pressured because meetings were still going on and she had to leave early, but I really think that workplaces have to come around and understand that women with young children have certain needs. They should understand, because many of the men who are at the workplace have wives at home maybe with the small children. My feeling is that if more women that are actually in the workplace have kids and talk about their issues, the more awareness will increase, so it will just become normal that you can have a flexible work schedule as a woman.

I took my babies along to conferences for years and I organized nannies wherever I was, as did one or two other women I know of. By having people like us go to the conference but bring the baby, have the babysitter and give your talk then go off and do what you need to do, people see that and that's what can make change just by doing it and not thinking that you can't go because you have a baby, ending your career because you have a child. No, just try to manage it and eventually, hopefully, the world will change.

JB: Thank you very much Lisa, it was really great to talk to you.

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