Salih Neftçi

Last updated
Salih N. Neftçi
Born 14 July 1947
Istanbul, Turkey
Died 15 April 2009
Aubonne, Switzerland
Citizenship Turkey, United States, Switzerland
Alma mater University of Minnesota
Known for Introductory book on Finance
Scientific career
Fields Mathematical Finance
Institutions CUNY Graduate Center, The New School, Baruch College, Swiss Finance Institute, University of Lausanne, ICMA Centre, International Monetary Fund, The World Bank, U.S. Department of State

Salih Nur Neftçi (14 July 1947 – 15 April 2009) was a leading expert in the fields of financial markets and financial engineering. He served many advisory roles in national and international financial institutions, and was an active researcher in the fields of finance and financial engineering. Neftçi was an avid and highly regarded educator in mathematical finance who was well known for a lucid and accessible approach towards the field.

Financial engineering is a multidisciplinary field involving financial theory, methods of engineering, tools of mathematics and the practice of programming. It has also been defined as the application of technical methods, especially from mathematical finance and computational finance, in the practice of finance. Despite its name, financial engineering does not belong to any of the fields in traditional professional engineering even though many financial engineers have studied engineering beforehand and many universities offering a postgraduate degree in this field require applicants to have a background in engineering as well. In the United States, the Accreditation Board for Engineering and Technology (ABET) does not accredit financial engineering degrees. In the United States, financial engineering programs are accredited by the International Association of Quantitative Finance.

Mathematical finance, also known as quantitative finance, is a field of applied mathematics, concerned with mathematical modeling of financial markets. Generally, mathematical finance will derive and extend the mathematical or numerical models without necessarily establishing a link to financial theory, taking observed market prices as input. Mathematical consistency is required, not compatibility with economic theory. Thus, for example, while a financial economist might study the structural reasons why a company may have a certain share price, a financial mathematician may take the share price as a given, and attempt to use stochastic calculus to obtain the corresponding value of derivatives of the stock. The fundamental theorem of arbitrage-free pricing is one of the key theorems in mathematical finance, while the Black–Scholes equation and formula are amongst the key results.

Contents

Background

Salih was born into a prominent wealthy Turkish family with ties to the oil business (neft is Arabic for oil). Until he was 11, he lived in Kirkuk, Iraq, but then moved to Istanbul. His mother, Nermin Neftçi was the vice chairman of Turkish parliament, and the first woman in Turkey to be so. His father moved along with the rest of the family to Turkey. He received his B.S. in Economics from the Middle East Technical University and his Ph.D. in Economics from the University of Minnesota in 1977. His dissertation is entitled "Three essays in business cycle research." Throughout his life, Salih maintained close links with U.S. academia and Wall Street.

Kirkuk City in Iraq

Kirkuk is a city in Iraq, serving as the capital of the Kirkuk Governorate, located 238 kilometres north of Baghdad. Kirkuk lies in a wide zone with an enormously diverse population and has been multilingual for centuries. There were dramatic demographic changes during Kirkuk's urbanization in the twentieth century, which saw the development of distinct ethnic groups. Kurds, Iraqi Turkmen, Arabs, Chaldeans, and Assyrians lay conflicting claims to this zone, and all have their historical accounts and memories to buttress their claims.

Iraq republic in Western Asia

Iraq, officially known as the Republic of Iraq, is a country in Western Asia, bordered by Turkey to the north, Iran to the east, Kuwait to the southeast, Saudi Arabia to the south, Jordan to the southwest and Syria to the west. The capital, and largest city, is Baghdad. Iraq is home to diverse ethnic groups including Arabs, Kurds, Assyrians, Turkmen, Shabakis, Yazidis, Armenians, Mandeans, Circassians and Kawliya. Around 95% of the country's 37 million citizens are Muslims, with Christianity, Yarsan, Yezidism and Mandeanism also present. The official languages of Iraq are Arabic and Kurdish.

Istanbul Metropolitan municipality in Marmara, Turkey

Istanbul, historically known as Byzantium and Constantinople, is the most populous city in Turkey and the country's economic, cultural and historic center. Istanbul is a transcontinental city in Eurasia, straddling the Bosporus strait between the Sea of Marmara and the Black Sea. Its commercial and historical center lies on the European side and about a third of its population lives on the Asian side. With a total population of around 15 million residents, Istanbul is one of the world's most populous cities, ranking as the world's fourth-largest city proper and the largest European city. The city is the administrative center of the Istanbul Metropolitan Municipality. Istanbul is viewed as a bridge between the East and West.

Neftci was diagnosed with Gliosarcoma, a type of malignant brain cancer and died on April 15, 2009. In November 2009, the Salih Neftci Memorial Scholarship Fund [1] was endowed in perpetuity at Baruch College to help promote education and awareness of the financial engineering field of study.

Gliosarcoma Human disease

Gliosarcoma is a rare type of glioma, a cancer of the brain that comes from glial, or supportive, brain cells, as opposed to the neural brain cells. Gliosarcoma is a malignant cancer, and is defined as a glioblastoma consisting of gliomatous and sarcomatous components.

Teaching and Research

Salih was one of the most productive researchers in financial engineering and taught in the areas of numerical methods of asset pricing, the mathematics of financial derivatives, emerging market asset trading strategies, and advanced risk management. Early in his career, Neftci specialized in econometrics and macroeconomics. He produced classic papers on relationships among aggregate time series, especially wages and employment, over the business cycle, which appeared in the very best journals in economics and statistics, including Econometrica , the Journal of Political Economy , the Journal of the American Statistical Association , and the Review of Economics and Statistics . Starting in the late 1980s, he turned his attention to finance and produced seminal books on the mathematics of financial derivatives and the principles of financial engineering.

Derivative (finance) financial instrument whose value is based on one or more underlying assets

In finance, a derivative is a contract that derives its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate, and is often simply called the "underlying." Derivatives can be used for a number of purposes, including insuring against price movements (hedging), increasing exposure to price movements for speculation or getting access to otherwise hard-to-trade assets or markets. Some of the more common derivatives include forwards, futures, options, swaps, and variations of these such as synthetic collateralized debt obligations and credit default swaps. Most derivatives are traded over-the-counter (off-exchange) or on an exchange such as the New York Stock Exchange, while most insurance contracts have developed into a separate industry. In the United States, after the financial crisis of 2007–2009, there has been increased pressure to move derivatives to trade on exchanges. Derivatives are one of the three main categories of financial instruments, the other two being stocks and debt. The oldest example of a derivative in history, attested to by Aristotle, is thought to be a contract transaction of olives, entered into by ancient Greek philosopher Thales, who made a profit in the exchange. Bucket shops, outlawed a century ago, are a more recent historical example.

Risk management Set of measures for the systematic identification, analysis, assessment, monitoring and control of risks

Risk management is the identification, evaluation, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.

Econometrics is the application of statistical methods to economic data in order to give empirical content to economic relationships. More precisely, it is "the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference". An introductory economics textbook describes econometrics as allowing economists "to sift through mountains of data to extract simple relationships". The first known use of the term "econometrics" was by Polish economist Paweł Ciompa in 1910. Jan Tinbergen is considered by many to be one of the founding fathers of econometrics. Ragnar Frisch is credited with coining the term in the sense in which it is used today.

He arguably is best known for two particularly well-received textbooks on mathematical finance: An Introduction to the Mathematics of Pricing Financial Derivatives and Principles of Financial Engineering. These books have become standard texts in many financial engineering programs around the world. One of financial engineering's most eminent and visible practitioners and educators, Paul Wilmott, has written of An Introduction to the Mathematics of Financial Derivatives: [2]

Paul Wilmott Financial economist

Paul Wilmott is an English researcher, consultant and lecturer in quantitative finance. He is best known as the author of various academic and practitioner texts on risk and derivatives, for Wilmott magazine and Wilmott.com, a quantitative finance portal, and for his prescient warnings about the misuse of mathematics in finance.

Neftci (1996) is the only readable book on stochastic calculus for beginners. It does not assume any knowledge about anything. It takes the reader very slowly through the basics as applied to finance.

He taught at Boston College, George Washington University, and Fordham University before assuming a position in the Ph.D. Program in Economics at the CUNY Graduate Center in 1982. He remained at that institution for the next 26 years. During part of that time, he also taught in the Financial Engineering Masters Program at Baruch College, [3] which also is part of CUNY. In January 2008, Neftci left the Graduate Center for a position at the New School [4] in New York. He had the foresight to encourage the New School to establish a program in global finance, which in his words “offers state-of-the art information resources and quantitative tools and techniques needed by the 21st century international financial profession.”

Boston College private research university in Chestnut Hill, Massachusetts, United States

Boston College is a private Jesuit research university in Chestnut Hill, Massachusetts. The university has more than 9,300 full-time undergraduates and nearly 5,000 graduate students. The university's name reflects its early history as a liberal arts college and preparatory school in Dorchester. It is a member of the 568 Group and the Association of Jesuit Colleges and Universities. Its main campus is a historic district and features some of the earliest examples of collegiate gothic architecture in North America.

George Washington University university in Washington, D.C.

The George Washington University is a private research university in Washington, D.C. It was chartered in 1821 by an act of the United States Congress.

Fordham University American university

Fordham University is a private research university in New York City. Founded by the Catholic Diocese of New York in 1841, it is the oldest Catholic university in the northeastern United States, the third-oldest university in New York, and the only Jesuit university in New York City.

At the time of his death, he was Professor of Economics at the New School University in New York City, Director of the Master of Arts Program in Global Political Economy and Finance at that university, [4] Director of the Financial Engineering and Asset Management (FAME) Certificate Program at the Swiss Finance Institute and the University of Lausanne in Switzerland, a frequent lecturer in finance at the Hong Kong University of Science and Technology and at the International Capital Market Association Centre (ICMA) in the Business School for Financial Markets at the University of Reading in England, a consultant to the International Monetary Fund, the World Bank, the U.S. Department of State, and the Agency for International Development, and a newspaper columnist in Turkey and China. He held a seat on the Fitch Ratings Advisory Board from its inception in 2005.

Selected publications

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Baruch College college in New York City

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Bahçeşehir University

Bahçeşehir University (BAU) is a private educational institution in Turkey, located at the European side of Istanbul. The Turkish National Assembly authorized the establishment of the University of Bahçeşehir by the Bahçeşehir Uğur Education Foundation in 1998. An academic and strategic protocol was signed shortly after with San Diego State University in California, USA. The enrollment of the first students was made after the first placement exam (ÖSYS) in 1999–2000 academic year. The university is one of the few universities in Turkey which has it lectures in English and therefore students applying to BAU are required to have high English proficiency.

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