ECONOMY

Calculating success

All sorts of traditional stock and investment markets will belong to the past within five years, as the future belongs to derivative products, Dr David Gershon, president and CEO of SuperDerivatives, told Kathimerini. SuperDerivatives is the world’s biggest firm in software development for the pricing of options, for investment risk management and the constant valuation of portfolios. «The central idea for the development of our software programs is based on the quantification of the notion of investment risk,» Gershon said during a visit to Athens. «By combining this idea with the science of physics, through which there is the quest for the optimum, I have obtained a vision. My aim was to attribute some transparency to derivatives markets, and this transparency is what renders them attractive to an ever growing public,» he added. He explains that he conceived the idea of the SuperDerivatives software program development when he worked on Wall Street in the early 1990s. He noticed then that those involved with the derivatives market were finding it hard to price the products. They believed that their pricing was a matter of «opinion» or «personal criteria,» while the only tools at their disposal were empirical or statistical. However, statistics is a science which relies on data of the past, while the increased instability and the high momentum of the derivative product market highlighted the need for a new model to be developed, working as a point for reference. Yet Gershon realized that the opinions of the most experienced traders tended to converge, so he began to study and analyzed their methodology for two years to determine the consensus price of options. The software programs of SuperDerivatives are used today by central and commercial banks, as well as by private companies that wish not only to invest in derivative products, but also to hedge investment, foreign currency and other risks. The transparency which the methodology of SuperDerivatives attributes to the derivatives markets concerns both the preparation of every transaction and the valuation of each portfolio at any moment. This is absolutely essential given the constant movement or particular momentum that these markets have. Asked about his interest in the Greek market, Gershon qualifies it as «great,» just like in several other European and Mediterranean markets where investing in options and hedging are only starting to take off or to become common practice. He stresses he is impressed by Greek banks and company officials who realize the notion of risk management when choosing to get involved with the derivatives markets. Finally, he admits that derivatives markets are not immune to bubbles, «but at least in these markets, with the use of the practice of hedging, bankers need not worry,» he said.