Ulrich Horst

How should investors behave? What influence does an order have on equity markets? And, most importantly, what dynamics are involved in international financial markets? Prof. Dr. Ulrich Horst is looking for answers to these and other questions. He is a professor of applied financial mathematics at Humboldt-Universität zu Berlin and also one of the two scientific directors of the Quantitative Products Laboratory (QPL) – a joint initiative of Deutsche Bank, Humboldt-Universität zu Berlin and Technische Universität Berlin.

Constant Exchange with Deutsche Bank Team

The main focuses of Prof. Horst’s work are just as dynamic as financial markets themselves. Constant productive exchange with the team at Deutsche Bank helps his group of researchers stay on the pulse of the times. This constructive dialogue also allows Prof. Horst and his team to see very quickly what is needed in practice: “It lets us recognize and respond to new thematic fields as early as possible,” he explains.

One of these thematic fields is the area of “hidden liquidity,” which is understood by traders as share orders that have the potential to heavily influence market prices and which therefore are not immediately made visible in order books. So as to avoid influencing prices via such trades, a trader sells the shares in bits and pieces, thus making his total order visible in the order book only little by little. Prof. Ulrich Horst performs research into how a trader should best go about this process.

Models in Practical Tests

Horst, a financial mathematician, uses his models to illustrate the factors that affect a trade. How many shares does an investor want to buy? What goal is he aiming for? Does the trade depend on certain dates? Each model is based on a set of specific assumptions. Anyone who orients their decisions according to Horst’s models is not permitted to separate results and assumptions. “If these are given,” says Horst, “a model is a good first approach to reality.” Deutsche Bank regularly tests the models developed by Professor Horst and his team in practice with the goal of using them on a long-term basis.

Attracted by Berlin’s Interdisciplinary and Cooperative Environment

“The quality of our collaboration with Deutsche Bank is very new and most likely unique in the world,” explains professor Ulrich Horst. Close cooperation between business and science was one of the reasons that brought Horst to Berlin in 2007.  Among the other qualities that convinced him to make the move to the capital was the noticeable interdisciplinary cooperation among disciplines. Together with colleagues from economics, statistics and mathematics, Professor Horst also performs research in the special field of “Economic Risk” at Humboldt-Universität.

The Center of Financial Mathematics in Germany

“Berlin has been an important center for financial mathematics in Germany for roughly 15 years,” explains Ulrich Horst. “The sheer number of scientists working in the field is itself impressive.” Berlin has more than ten university departments focusing on probability theory and financial mathematics, and one also finds other departments for statistics and econometrics, the Weiserstrass Institute for Applied Analysis and Stochastics and large-scale research projects such as the DFG Research Center MATHEON. The Berlin Mathematical School, a joint initiative of Berlin’s three major universities, and the “Stochastic Models of Complex Processes” graduate school train the leading mathematicians of the future.

Before moving to Berlin, Ulrich Horst taught and performed research at the University of British Columbia in Canada and at Princeton University in the USA. Although this financial mathematician collaborated there with an energy provider and a hedge fund, his work was only short-term and part of smaller projects. Humboldt-Universität zu Berlin knows Ulrich Horst very well – he received his “Promotion” (conferral of a doctorate) here.