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Zili Zhu BSc MEng PhD

Principal Research Scientist
Quantitative Risk Management
CMIS, Clayton, Vic. Australia

Dr Zhu leads the CSIRO Finance & Risk research team in developing innovative analytics and solutions in pricing and risk management for the finance, energy industries. He also leads the R&D team in developing Real-option methodologies for optimally selecting power generation technologies under the uncertainty of Carbon price risk. Another CSIRO initiative led by Dr Zhu is the development of a Real-option framework for determining the optimal mix of growing crops and trees for efficient land-use in the uncertain lower carbon environment.

Current Activities

Developing risk-adjusted valuation framework for optimal portfolio investment in power generation technologies under long-term uncertainties.
Developing Real-Option valuation tool for efficient land-use given carbon risks.
Development of a dynamic design tool for derivatives-: Reditus. (see a simple Poster and a list of Models) (Details on Redituscan be downloaded in a PowerPointand a press release).
Provide services to the finance industry with consulting, training, software development and support
Pricing of equity exotic options, interest-rate and FX derivatives
Modelling and pricing of investments linked to long-term carbon and energy prices through Real-Option methodology
Model development and validation
Development of numerical methods and algorithms for computing volatility surfaces. A new scheme for computing local volatility from market implied data has been demonstrated to be very stable for difficult implied volatilities.

Fields of Expertise

Financial Engineering: exotic options-pricing, market risk, portfolio optimization, optimized hedging, volatility surface modelling, Real-Options methods, modelling of extreme rare-events, interest-rate modelling, commodity futures modelling.
Applied Mathematics: stochastic processes, partial-differential equations, panel methods.
Numerical Methods: finite-element, finite-difference, Monte-Carlo and tree methods.
Computational Fluid Dynamics: turbulence modelling, combustion, multi-phase flows.
Naval Architecture: marine propulsion, propellers design, cavitations modelling

Clients

Dr Zili Zhu has led CSIRO team of scientists in providing consulting, risk modelling and training services to a large number of financial and energy institutions, including: Commonwealth bank of Australia, St George Bank, National Australia Bank, Edge-Cap, Australia Energy Market Operator.

Awards

2009: Partnership Excellence Award, (Z. Zhu, T. Lo, P. Shevchenko, A. Dingjan, N. Marsh). Awarded for working towards an international alliance where a significantly better outcome has been achieved by the partnership.
2007: Go for Growth Award, Reditus Team (Z. Zhu, P. Shevchenko, X. Luo, T. Lo).Awarded for developing advanced, accurate and fast mathematical techniques for Reditus, which is the plug-in to FENICS FX (the international standard in pricing and trading foreign currency options). Reditus users have grown from 5 in 2005/06 to 100 by June/2007.
2005: Reditus was selected as the finalist for iAwards of AIIA.
1998/1999: CMIS Rewards for Exceptional Achievement for the development of options-pricing business, especially the CSIRO/CBA collaboration.
1996: Awarded CSIRO Medal for the development and launch of Fastflo.
1990: Australian Postgraduate Research Award, University of Sydney.
1989: Awarded a Peter Nicol Russell Scholarship, University of Sydney.
1987: Awarded a Scholarship for PhD studies at the University of Notre Dame USA.

Whitepaper

Selecting the right technology for future power generation.

Some Papers on Option-Pricing

Tanya Tarnopolskaya, and Zili Zhu (2011): CVaR-minimising hedging by smoothing method as an alternative to delta-gamma hedging, submitted to ANZIAM Journal, e-Publish Ref No: EP11423, January 2011.
Oscar Y. Tian, Zili Zhu, Fima Klebaner, and Kais Hamza (2011): Using Monte Carlo Methods and the SABR Model for Pricing Barrier Options on the GPU. e-Publish Ref No: EP11266, accepted to appear in the Journal Concurrency and Computation by Wiley, January 2011.
Make a Killing by Planting A Tree: What to Expect from the Uncertainty in Future Carbon Prices. (submitted to Decisions in Economics and Finance, September 2010)
Yu Tian; Zhu, Zili; Klebaner, Fima C.; Hamza, Kais (2010): "Option pricing with the SABR model on the GPU," High Performance Computational Finance (WHPCF), 2010 IEEE Workshop on Computational Finance, pp.1-8, 14-14 Nov. 2010 doi: 10.1109/WHPCF.2010.5671816. The paper was selected and recommended by CULA Tools Web.
Tarnopolskaya, T. and Z. Zhu: CVaR-Minimising Hedging via Smooth Approximation as an Alternative to Discrete Delta-Gamma Hedging, The 15th Biennial Computational Techniques and Applications, CTAC2010, 28th Nov–1st Dec 2010, Sydney, NSW, Australia
Z. Zhu (2009), Exotic Pricing and Hedging, Intelligent Finance – towards comprehensive predictive dynamic and strategic analysis of global financial markets, Pan Heping, Wang Shouyang and Zhang Wei, Editors, 3rd International and 1st Chinese Forum on Intelligent Finance (IWIF-III & CFIF-I), February 26-28, 2009, Beijing, China. ISBN ：978-0-9808223-0-4
Tarnopolskaya, T. and Z. Zhu, A Robust Hedging Strategy via CVaR Minimisation, Proc. of The First Chinese-Asian Forum on Intelligent Finance (CAFIF-I 2009) and the First Chinese Forum on Intelligent Finance (CFIF-I 2009).
Tarnopolskaya, T. and Z. Zhu: Improving Hedge Performance via Automatic Selection of Hedging Instruments, Proc. of The First Chinese-Asian Forum on Intelligent Finance (CAFIF-I 2009) and the First Chinese Forum on Intelligent Finance (CFIF-I 2009).
A Fully-Coupled Solution Algorithm for Pricing Options with Complex Barrier Structures. Journal of Derivatives, Fall 2010, Vol. 18, No. 1: pp. 9-17, 2010.
A Scenario-Based Integrated Approach for Modeling Carbon Price Risk. Journal of Decisions in Economics and Finance, Volume 32, Issue 1, Page 35, 2009.
Using Local Volatility Surfaces to Get Market Prices for Barrier Options, Proc. of the First International Workshop on Intelligent Finance (IWIF 2004), Melbourne, Australia.
Pricing Path-dependent (Asian & Parisian) Options with FEM. (QMF-99) International Conference on Quantitative Methods in Finance, Sydney, 1999.
Improving Pricing Accuracy for Options with Optimal Early Exercise. (QMF-99) International Conference on Quantitative Methods in Finance, Sydney, 1999.

Some Confidential Project Reports

Dr Thaung Lwin and Dr Zili Zhu: Techniques for Predicting Implied Volatilities from Correlation Relationship, CSIRO Confidential Report EP115421, 21/July/2011.
Dr Zili Zhu and Pavel Shevchenko: Validation of CBA Option Pricing Models: Final Report on Implied Volatility Construction, , e-publish EP114080 – June, 2011.
Dr Zili Zhu and Dr Pavel Shevchenko: Validation of *** bank's Option Pricing Models: Final Report on Local Volatility Construction, e-publish EP114081 – June, 2011.
Dr Pavel Shevchenko and Dr Zili Zhu: Validation of *** bank's Option Pricing Models: FX TARN Overall Report, e-publish EP114079 – June, 2011.
Dr Pavel Shevchenko and Dr Zili Zhu: Validation of *** bank's Option Pricing Models: Implied Volatility and Local Volatility Intermediate Report, e-publish EP112276 – April, 2011.
Z. Zhu, R. Jarrett, P. Shevchenko and S. Dunstall (2010). Investigation of approaches for the identification of extreme events for electricity transmission network. CSIRO confidential report for ****, EP-27-05-10-55, June 2010.
Dr Zili Zhu: Modelling Long-Term Natural Gas Spot Price and Demand, CMIS Report 08/20, February 2008.
Dr Zili Zhu: Quantitative Comparison of Pricing Algorithms for A Capital Market Deal, (a confidential consulting report for ****). CMIS Report 06/211, January, 2006.
Peter Thomson (Statistics Research Associates Ltd, New Zealand) and Zili Zhu: AGRI-COMMODITY FUTURES CURVE METHODOLOGY REVIEW (a confidential consulting report for ****), CMIS Report No.06/03 Version No. 3.3 (16/3/2006) 16th of March 2006.
Dr Zili Zhu, Dr Richard Jarrett, Dr Tony Miller, Dr Xun Guo Lin Front-Office Trading System **** and Global Market Risk System **** (a confidential consulting report for ****), CMIS Report No.05/164 Version No. 2.4 (27/1/2006) 27 January 2006.
Dr Zili Zhu: Consistency Analysis of Interest-Rate Exotic Options and Vanilla Options (a confidential consulting report for ****). CMIS Report No.05/132 Version No. 7.4 (24/3/2006) 24th of March 2006
Dr Zili Zhu, Dr Richard Jarrett, Dr Tony Miller, Dr Xun Guo Lin: Foreign-Exchange Currency Options Pricing in Global Market-Risk System (a confidential consulting report for ****). CMIS Report No.05/139 Version No. 5.4 (22/3/2006) 22nd March 2006.
Dr Zili Zhu, Dr Xiaolin Luo and Dr Pavel Shevchenko: Review of Pricing Algorithms for A Complex Capital Security Deal (a confidential consulting report for ****), CMIS Report 05/131, (2005).
Dr Zili Zhu, Dr Richard Jarrett, Dr Tanya Tarnopolskaya, Dr Xiaolin Luo: Further Review of Horizon Currency Options Pricing System (a confidential consulting report for ****). CMIS Report No.05/03 Version No. 1.14 (18/1/2005) January 2005
Dr Zili Zhu & Dr Pavel Shevchenko: Review of Currency Options Pricing System (a confidential consulting report for ****), CMIS Report No. 04/103, June 2004.
Zili Zhu, John van der Touw, Daniel Prager, Jodie Duncan: Modelling & Pricing of Energy Utilities (A Report for ****), 31 October 2001, 01/177.

Contact Details

Organisation: CSIRO Mathematical and Information Sciences
Location: Gate 7, 77 Normanby Road, Clayton Vic.
Mail: Private Bag 10, Clayton South, 3169
E-mail: Zili.Zhu@csiro.au
Telephone: +61 3 9545 8003
Fax: +61 3 9545 8080

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last updated 23/01/12