In this blog post the Founder and Director of the Finance Lab, Professor of Finance Tom McCurdy, talks about the BMO Financial Group Finance Research and Trading Lab’s vision and operations. He teaches in the Rotman Master of Finance and MBA programs, along with several other programs at the University.
As a Rotman Morning & Evening MBA or Master of Finance student, you’ll have classes in the lab that let you take full advantage of this high-tech facility that puts the global financial community at your fingertips.
Thanks for taking the time to talk with us! Can you tell us a little about the Finance Lab and your vision for founding it?
The Finance Lab is managed by myself, the lab manager, Marco Salerno, and Eric Kang. We’re also supported by a stellar team of lab assistants.
We were established more than 17 years ago with an aim of teaching finance while taking account of uncertainty in an explicit way. In the classroom, we sometimes discuss cases as if we have perfect foresight; but I want to also consider practicing a probabilistic viewpoint. What can and cannot be forecasted, and how do we make good decisions when facing uncertainty? Many successful strategies depend on good forecasts or at least an understanding of what can or cannot be predicted and with what degree of confidence.
One could teach probability theory and do forecasting in a very statistical way. But even if some students don’t have that background, I have found that they learn to think probabilistically by practicing making decisions across the range of possible outcomes. We use this simulation-based learning so that our students learn to make good decisions in complex situations for which there is considerable uncertainty.
Would you say the Finance Lab and its associated products like the Rotman Interactive Trader and Rotman Portfolio Manager are developed with practicality at its core?
Absolutely! When we are developing our simulation cases we talk to industry experts about their required skills, the nature of the decisions they have to make, and the risks and uncertainties associated with those decisions. As a result, our cases are designed to help students to prepare for their careers.
In fact, one of the world’s largest companies is using our market simulation platform and its associated learning-by-doing cases to train their own employees worldwide. They are in the commodities field, so we developed a sequence of highly-relevant, true-to-life cases that start from understanding how commodity and derivatives markets work; and then proceed to cases that are specifically designed to train participants for their required tasks and practice the decisions they have to make. For example, for crude oil, managing costs such as storage (cost-of-carry), production (refinery) decisions, transportation (pipeline or shipping) costs and associated strategies such as transportation arbitrage, news trading, and risk management (e.g. extreme weather, pipeline breaks, market price risk, etc.). Our cases really reflect the experiences of actual companies so naturally they have important benefits for teaching.
We have developed a large number of cases to practice decision-making under uncertainty across a wide range of business problems. Whenever we are developing new cases – such as specific cases on market microstructure with multiple exchanges and new trading technologies – one of things that I have to do is keep up on innovations in markets, new securities for enhanced risk management strategies, etc., so that our cases reflect best practice in industry but also add value for learning about new approaches. Of course we benefit from the knowledge of our MBA and MFin students, many of whom are working or have experience working in companies facing those problems.
How else do people use the Finance Lab?
Some students come to the Lab to research companies because they have an interview coming up and they want to know everything about the company. Most students use our Lab to collect up-to-date information and analyses for doing their course assignments. There is a wide range of activities happened in the Lab.
Beyond being an information portal, at the Finance Lab students can use our custom applications to integrate theory and research with practice. They can link their classroom lessons and discussions to real-time market information to get immediate feedback on their understanding and mastery of the relevant questions. That evolution to a dynamic learning center is really why our Lab has been successful.
Try out the Finance Lab in one of our fun and exciting market simulation events.