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Valuing complex insurance liabilities using least squares Monte Carlo

Summary of the impact

Research by Cathcart, McNeil (both Maxwell Institute) and Morrison (Barrie & Hibbert) during the period 2008-2012 has developed a methodology based on least squares Monte Carlo to value complex insurance liabilities and manage their risks. This methodology has been adopted by Barrie & Hibbert (B&H, part of Moody's Analytics) and has enabled the company to develop an internationally leading proposition for valuing insurance products. This has generated £2.5M in revenue since 2011, through implementation in 5 new products and use in 12 new consulting projects.

Submitting Institutions

University of Edinburgh,Heriot-Watt University

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Economic

Research Subject Area(s)

Mathematical Sciences: Statistics
Economics: Econometrics
Commerce, Management, Tourism and Services: Banking, Finance and Investment

Convex optimisation in financial risk management

Summary of the impact

Prof. Pennanen and collaborators have developed mathematical models and computational techniques for financial risk management. The techniques allow for quantitative analysis and optimization of financial risk management actions in an uncertain investment environment. The techniques have been used by the State Pension Fund, Ministry of Social Affairs and Health, Bank of Finland and Pension Policy Institute. The techniques have significant impact on practitioners and professional services in increasing the awareness and understanding of long-term financial risks that are difficult to quantify with more traditional techniques. Beneficiaries of the developed risk management techniques include future pensioners and tax payers.

Submitting Institution

King's College London

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Economic

Research Subject Area(s)

Mathematical Sciences: Applied Mathematics, Statistics
Commerce, Management, Tourism and Services: Banking, Finance and Investment

UOA10-01: Computational fluid dynamics: the Rolls-Royce HYDRA code for jet engine design

Summary of the impact

Rolls-Royce uses the HYDRA computational fluid dynamics (CFD) code for the design of all of its new gas turbine engines. The HYDRA CFD package, including the mathematical theory behind it, was developed by Professor Mike Giles and his research team in the period 1998-2004 at the University of Oxford, and subsequently transferred to Rolls-Royce, forming the basis of the RR corporate CFD strategy with an investment of over 100 person years in development.

Since 2009, HYDRA has become the standard aerodynamic design tool across Rolls-Royce, and has been used to design Rolls-Royce's Trent 1000 engine and the newer Trent XWB. HYDRA has enabled Rolls-Royce to save over [text removed for publication] in test rig expenses, provides superior accuracy compared to its competitors such as FLUENT, and has contributed to increases in engine efficiency of up to [text removed for publication], which in turn has led to higher sales and increased revenue for Rolls-Royce.

Submitting Institution

University of Oxford

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Technological

Research Subject Area(s)

Mathematical Sciences: Applied Mathematics, Numerical and Computational Mathematics
Information and Computing Sciences: Computation Theory and Mathematics

UOA10-11: Risk On / Risk Off: from academic research to financial market staple

Summary of the impact

This case study charts the influence of the Risk On / Risk Off (RORO) paradigm, developed in research at the University of Oxford in collaboration with investment bank HSBC. Since 2008, RORO has had a significant economic impact on HSBC as well as wider impact on the thinking and actions of investors and other global market participants. Having begun as a specialised research tool within HSBC's foreign exchange team, the RORO methodology was publicised in the advice that HSBC supply to a wide range of major fund managers, corporate institutions and central banks. The research has led directly to a change in the way that asset managers think about investment decisions, with consequent impact on the investment and risk management strategies they undertake. RORO is regularly featured in the financial press and is becoming increasingly mainstream, with coverage in national and international media aimed at retail investors.

Submitting Institution

University of Oxford

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Economic

Research Subject Area(s)

Economics: Applied Economics, Econometrics
Commerce, Management, Tourism and Services: Banking, Finance and Investment

UOA10-10: Development and implementation of mathematical algorithms enhance performance of software libraries on GPUs

Summary of the impact

Many of the top supercomputers use Graphical Processing Units (GPUs) to accelerate scientific computing applications with less energy consumption and lower overall cost. GPUs achieve this by having comparatively large numbers of simple processing elements when compared against CPUs, which have fewer, more sophisticated, elements. However, to take full advantage of GPUs requires quite different algorithms and implementation techniques for mathematical software libraries. Researchers at the University of Oxford have developed a number of such algorithms and implementation techniques over the period 2008-2013, which have been incorporated into software libraries distributed by NAG, NVIDIA and the Apache Foundation and have enhanced the performance up to 150x compared with single thread CPU calculations and 20x relative to multithreaded CPU calculations. These libraries are used by large numbers of application developers worldwide.

Submitting Institution

University of Oxford

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Economic

Research Subject Area(s)

Information and Computing Sciences: Artificial Intelligence and Image Processing, Computation Theory and Mathematics, Information Systems

Designing financial instruments to protect against financial stress

Summary of the impact

Research by Oxford econometricians provided the basis for innovative new methods for predicting periods of potential financial stress and providing protection for investors against extreme events. During periods of financial stress, equity funds tend to sharply lose value while volatility tends to increase. Adding some long volatility exposure to a standard equity portfolio can significantly improve the tail behaviour of a portfolio. However, it is expensive to continually hold volatility contracts due to the volatility risk premium. Researchers at Man Group have applied the Oxford research to create new strategies to protect against tail risk and these are incorporated in their Tail Protect fund launched in October 2009.

Submitting Institution

University of Oxford

Unit of Assessment

Economics and Econometrics

Summary Impact Type

Economic

Research Subject Area(s)

Mathematical Sciences: Statistics
Economics: Econometrics
Commerce, Management, Tourism and Services: Banking, Finance and Investment

Case Study 4: Novel optimisation significantly reduces costs, increases turnover and reduces emissions

Summary of the impact

Optimisation tools developed in the UoA have significantly advanced the ability to find the best designs for complex systems in cases where these were previously unobtainable. These optimisation tools have been implemented in several companies to shorten design times, reduce costs and reduce CO2 emissions. This has brought about new multi-million pound revenues, long-term contracts, increased employment and contribution to sustainability targets.

Submitting Institution

University of Leeds

Unit of Assessment

Civil and Construction Engineering

Summary Impact Type

Technological

Research Subject Area(s)

Mathematical Sciences: Applied Mathematics, Numerical and Computational Mathematics, Statistics

Industrial impact of Bayes linear analysis

Summary of the impact

This study demonstrates how Bayes linear methodologies developed at Durham University have impacted on industrial practice. Two examples are given. The approach has been applied by London Underground Ltd. to the management of bridges, stations and other civil engineering assets, enabling a whole-life strategic approach to maintenance and renewal to reduce costs and increase safety. The approach has won a major award for innovation in engineering and technology. The methodology has also been applied by Unilever and Fera to improve methods of assessing product safety and in particular the risk of chemical ingredients in products causing allergic skin reactions.

Submitting Institution

University of Durham

Unit of Assessment

Mathematical Sciences

Summary Impact Type

Technological

Research Subject Area(s)

Mathematical Sciences: Applied Mathematics, Statistics
Economics: Econometrics

New computational aerodynamics design tools for the aerospace industry

Summary of the impact

Research from the Sheffield Department of Mechanical Engineering has led to major improvements in engineering analysis and design software for aerospace companies such as Rolls-Royce and Airbus. As a result of introducing new practices based on our research, the organisations have reported significantly reduced time input to design components as well as related economic benefits. For example: Rolls-Royce has reported an order of magnitude improvement in the time needed to mesh components. Similarly, by adopting our highly efficient computational aerodynamics solvers, Defence Science & Technology Laboratory has reduced the time its engineers spent evaluating concepts from many days to a few hours.

Submitting Institution

University of Sheffield

Unit of Assessment

Aeronautical, Mechanical, Chemical and Manufacturing Engineering

Summary Impact Type

Technological

Research Subject Area(s)

Mathematical Sciences: Applied Mathematics, Numerical and Computational Mathematics
Engineering: Interdisciplinary Engineering

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