Admission to the PhD Program in Economics

Introduction: Statement of Purpose

I apply for admission to the PhD Program in Economics at the (indicate name of university) because of my keen interest in rigorously exploring factors that affect the risk management of extreme (tail) events as it relates chiefly to the financial services industry.

This interest is confirmed by my 25-year career within the financial service industry in relation to risk management. It does not only include credit risk management but also enterprise risk management and operational risk management. Additionally, my enthusiasm is also established by the value proposition of my company, Value4Risk, as well as the book that I recently authored and published on tail risk management.

With my career in consulting at Value4Risk, I had first-hand observations on some of the better and worse ways of running a business across various industries. A study on the vulnerability of business models with different financial companies taught me the importance of building more resilient business models that focus on qualitative risk mitigation tools rather than solely quantitative models. Moreover, the time limitation on each assignment has taught me to plan well, work systematically and keep my reports up-to-date. Concomitantly, having to defend my analyses and recommendations, these tasks have enlightened me to think both rigorously and creatively.

Educational Background

I have a strong academic background evidenced by two masters (applied economics and business administration) as well as the post-graduate degree in International Relations.

To build a technical toolbox, I have gained a substantial expertise in financial risk management and country risk management since it relates to geopolitics. I have also taken classes in statistics where I earned a GPA of 3.8, and economics with a GPA of 4.0. I am currently taking courses in data science to improve my skills in data analysis. To experience working with real research, I have authored and published a book on tail risk management and written more than 400 articles on related subjects on LinkedIn. I have been exposed to many parts of the research process: I have solved mathematical models in the scope of Basel II Internal Ratings Advanced-Based method for banks, corporates, sovereigns, and structured finance. These experiences have imparted to me the skills for graduate work and have also confirmed that research work is something I enjoy.

While the highly diverse nature of assignments has helped me gain a broad exposure to the financial services industry, it has not been possible for me to carry out an in-depth study of distinct tail risk management related issues. I realize that to be able to do so; I need a better understanding of the theoretical facets of risk management, vulnerability analysis, and business strategy. I also need to grasp the links between different functional domains of risk management. Last but not least, I require further training in research methodology.

My recent publications have also given me the skills needed for conducting the PhD research. This research should allow for a better understanding of the risk management of extreme events within the financial service industry. As vulnerability goes one more step further than merely risk analysis: it builds on the existing interdisciplinary and integrated tradition of risk, hazards and disaster research. As a result, it incorporates the best qualitative market practices and approaches from a myriad of industries. This study would not only help financial firms to build a more robust resiliency but even more crucial, adapt and recover from the effects of extreme events.

Reason for the Choice of Topic

I am inspired to conduct a management research on extreme risk management because over the last years I discovered some technical processes. The methods above act as tools of understanding corporate behavior, examination of extreme risk management phenomenon, reviewing the critical empirical factors, and making the correct variable and structural choices. To a larder extent, they will help in generating a tractable model that explains how extreme risks should be understood and managed. For instance, in my latest project publication on tail risk management, I took into consideration the various trade-offs between quantitative and qualitative approaches in relation to tail risk management.

In doing the research, I also developed a new interest in the world of quantum theory, and particularly in theory work that is significantly used by quantum physics as it relates to probabilities and predictions. In contrast to classical mechanics, quantum mechanics is probabilistic, namely, even in the presence of exact knowledge of the current situation, it is impossible to predict its future exactly, regardless of how much work and care one invests in such a prediction. Schrodinger (1926) asserts that particles do not have classical properties like position or momentum; rather, there is a wave function that assigns a (complex) number, called the amplitude, to each possible measurement outcome.

I became especially interested in how quantum physics impacts the risk management of financial market activities and how it can be applied to the risk management of rare (tail) events within the financial service industry, including geopolitical events. One quantum insight involved the importance of connectivity whereby the nature of change itself changes. Quantum physics shows that we live in a complex and interconnected world as we are living through such a change-in-change. Another insight is related to the need to accept that our world is a stochastic, fractal system in which there are patterns but no repetition (Wolfram 2002).

Eventually, I also concluded that while Big Data tools are fundamentally essential and useful in making predictions more robust, organizations will never be able to predict the world after tomorrow. For that reason, it is equally imperative to make institutions more resilient and agile when they come to face rare events. The work on antifragility (Nassim Taleb 2012) indicates that it is an increased resilience and agility that will help organizations become less fragile (i.e., antifragile). Therefore, organizations should be embracing instead of avoiding stressors such as shocks, volatility, noise, mistakes, faults, attacks, or failures. It is through these experiences that organizations become more robust when facing emerging risks.

The key aspect of understanding tail risk events and managing them is to build a multi-dimensional model that not only embraces resiliency and complexity but also considering scenarios where irrational human behavior plays a key role. Here too, mathematical principles behind quantum mechanics could be used to understand better the notoriously difficult human behavior that sometimes causes tail events. However, one should always keep in mind that in the aftermath of a disaster senior executives in governmental and business organizations typically tend to use the term Black Swan too lavishly. Apart from understanding the complexity and connectivity, it is also important to propose solutions and tools that will make organizations more resilient. Such mechanisms include risk mapping and vulnerability analysis, reverse stress testing, supply chain resilience, financial contingency planning, and sustainable business models.

Other than the inspiration and ideas, the successive responsibilities and projects during my professional career involved the interaction both with internal and external stakeholders. I have a twenty-five years banking career working in risk management, with a particular focus on financial market activities. In my last positions as a senior risk executive, I had been involved fields that are related to extreme risk management, such as business continuity, enterprise risk management, and operational risk. This has given me valuable acumen into the environment in which financial firms operate - how severe risks affect the business environment of these companies, and how they mitigate the effects of these tail events.

Not many research papers have incorporated the impact on business models of the interaction between capital markets and geopolitics. I believe that the PhD Program in Economics would be significant in helping me reach these goals and provide conclusive answers those research questions. It would allow me to direct my conceptual and quantitative skills in evaluating risk management matters as well as advance research. After earning a PhD, I would consider applying for a teaching position at one of leading universities. I would also like to investigate issues about business resiliency as it affects strategic governance and processes.

Bibliography

Curtis, Simon. 2016. "Connectography: Mapping The Global Network Revolution. By Parag Khanna". International Affairs 92 (6): 1533-1534. doi:10.1111/1468-2346.12768.

Goldberg, Lisa R., Michael Y. Hayes, Jose Menchero, and Indrajit Mitra. 2009. "Extreme Risk Management." SSRN Electronic Journal. doi:10.2139/ssrn.1341363.

Lau, Lawrence J. 2010. "Financial Regulation And Supervision Post The Global Financial Crisis". SSRN Electronic Journal. doi:10.2139/ssrn.2537169.

Pate-Cornell, Elisabeth. 2012. "On "Black Swans" And "Perfect Storms": Risk Analysis And Management When Statistics Are Not Enough." Risk Analysis 32 (11): 1823-1833. doi:10.1111/j.1539-6924.2011.01787.x.

Ritchie, Bob. 2005. "Supply Chain Risk Management." The International Conference On Business & Technology Transfer 2004.2 (0): 8-23. doi:10.1299/jsmeicbtt.2004.2.0_8.

Schrodinger, E. 1926. "A Undulatory Theory Of The Mechanics Of Atoms And Molecules." Physical Review 28 (6): 1049-1070. doi:10.1103/physrev.28.1049.

Sheffi, Y. 2016. "The Power Of Resilience: How The Best Companies Manage The Unexpected." Choice Reviews Online 53 (07): 53-3131-53-3131. doi:10.5860/choice.195121.

Strauman, Simon. 2016. "Karamjeet Paul: Managing Extreme Financial Risk: Strategies And Tactics For Going Concerns." Financial Markets And Portfolio Management 30 (1): 111-112. doi:10.1007/s11408-016-0261-0.