Joran Hu didn't study finance for a day, but his 30-year career is all about finance. (Xu Zhenhui / Photography)
RiskVal has patented design drawings of computer components, and founder Jordan Hu refers to USB design drawings. (Xu Zhenhui / Photography)
RiskVal Financial Solutions is a very special company in Manhattan, New York. Here are some things about the founder and CEO Jordan Hu:
• 30 years ago, Jordan Hu only sent one resume, found his first job and entered Salomon Brothers Inc. • Jordan Hu is a mathematics major, and has not studied finance for a day, but has a finance and finance-related career spanning 30 years. • RiskVal has not hired marketing personnel, and has not done a day's advertising • RiskVal has used the role of financial risk control “weapon supplier” to enter Wall Street • RiskVal was founded 19 years ago, and the world ’s largest financial transaction control strategy companies, world-class investment institutions know Jordan Hu and RiskVal.
Since the establishment of RiskVal, Jordan Hu has won dozens of important awards.
Among them, • Received the “Smart CEO FUTURE 50” in New York for three consecutive years (2016–2018) • Received the “Waters Rankings Awards Best Risk Management System” (Best Portfolio Management System Provider, 2016-2018) for three consecutive years. "Waters Technology" is a well-known financial information technology monthly magazine, specializing in the application of information technology in the capital market.
With a background in mathematics, how did Jordan Hu enter the field of financial engineering? What exactly does RiskVal do?
Before answering the above questions, understand Wall Street.
On Wall Street, investment bank transactions are divided into buyers and sellers. Buyers do pre-transaction analysis and strategy execution, and sellers sell goods to benefit. The buyer is divided into the front office, middle office, and back office. The front office should understand the trading strategy and do risk management; the middle office deals with the value at risk; the back office is to confirm the total amount, amount and payment of the transaction. For example, if there are 10 buyers in an investment bank, the main force is to do transactions at the front office, with at most 1 or 2 people in the middle stage and 2 or 3 people in the back office. Generally speaking, salaries are higher at the front office, but also more stressful.
In addition to traders at the front office, they also need quantitative analysts (Quant) to design trading models (mainly computer programming), perform derivative financial commodity pricing, risk valuation or predict market behavior. The middle and back-office staff will also use Quant's work to assist the business.
In 1989, Jordan Hu entered the Solomon Brothers and was a technician at the buyer's front office.
Sent one job application and successfully employed
Jordan Hu was born in Taiwan. After graduating from the Department of Mathematics at Tsinghua University in Hsinchu, and completing military service, he studied at the New Jersey Institute of Technology for a master's degree in computer science. After receiving the degree, a friend told Jordan Hu that Solomon Brothers was recruiting people. Jordan Hu sent his resume, entered the Solomon Brothers in 1989, and worked in the department of the fixed income market.
Established in 1910, the Solomon Brothers started with bond trading and once accounted for 60% of U.S. Treasury trading. At the time, they were the world's most profitable fixed-income company. The so-called fixed income is "the income obtained by investors at the best-predetermined interest rate". Investment projects such as bank time deposits, government bonds, financial bonds, corporate bonds, convertible bonds, bond funds, etc. At the end of the period, investors can receive the agreed interest.
There are 25 people in the Solomon Brothers' proprietary department. They study investment methods together and specialize in a certain transaction. Jordan Hu is responsible for computerizing transaction data and calculation models. A few years later, he entered the trading room.
The proprietary department needs to complete the annual investment amount and goals delivered by the company, and analyze which commodities can be profitable, how much risk is assumed, and how to avoid risks. Second, multiple transactions are executed every day, which can generate strategic results after accumulation. Third, once the external environment changes, such as the Federal Reserve cuts interest rates, the trading strategy must be adjusted to optimize the use of funds.
Jordan Hu said that investment cannot guarantee a certain amount of money, but it can increase profit opportunities through scientific methods. He said, "I haven't studied finance. This job is very challenging for me." After staying with Solomon Brothers for four years, Jordan Hu joined Goldman Sachs for two years before returning to Solomon Brothers.
Decides to Start a Business after Losing the Job
However, after the acquisition of Solomon Brothers by Citigroup (formerly known as the Travelers Group), the focus on the proprietary model of Solomon Brothers was suspended. Jordan Hu was unemployed. It was 1998. He pondered whether to find another job in the financial industry and also saw the rise of the Internet, driving the need for risk assessment of real-time transactions.
Jordan Hu said, "I do trading strategies. My trading experience is valuable. Turn it into a commodity, and customers can grasp the opportunities that may make money." He thought that there is a market if a trading strategy system is to be sold to investment institutions through the Internet.
Jordan Hu is determined to start a business. But he also admits, "I'm a techie. I didn't know how to do business at first, but I had a good timing."
At that moment, Credit Suisse gave him a three-year contract and asked him to build an internal system. With this contract as the basis, Jordan Hu hired R & D personnel and established RiskVal Financial Strategy Company in 2001 and launched a "RiskVal Fixed-Income (RVFI)" trading strategy analysis system.
RVFI is a 24-hour platform that collects quotations of fixed income commodities such as fixed deposits, credits, loans, options, bonds, futures, and derivative commodities. Through mathematical model analysis, it quantifies various influencing factors and provides multiple transaction evaluations. Hoping that customers "under controllable risks" increase investment profits.
When Jordan Hu was looking for the investment agency business opportunities, his experience at Solomon Brothers' proprietary desk helped. The Solomon Brothers were Wall Street's best-performing proprietary units at the time, and these investment agencies want to know why Solomon could make so much money. This is the niche of RiskVal. RiskVal customers now come from institutional investors such as banks, securities dealers, asset managers, hedge funds, insurance companies and pension funds worldwide.
Build platforms to provide weapons
Jordan Hu said that investment institutions hold huge amounts of funds. The basic size of a hedge fund is 10 billion dollars and the transaction volume is large; the deposits, loans, and receivables of large banks are also huge. To maintain their size, these institutions must always generate profits, and they are looking for safe investment goods.
RiskVal provides a strategic platform for investors to pay a small amount of rent. Jordan Hu said, "To what extent? It is not enough for it to build the system itself." At the current market level, to build the system, computer talents need to be hired for research and development. The personnel cost is several hundred thousand dollars a year, and the solution can only be successfully built in a few years. These investment institutions will not do it by themselves, "this is my starting point."
Jordan Hu said: "I don't help clients operate or manage funds. I provide a platform to help them find profit opportunities. It's like they go to war and I supply weapons."
So why don't others enter this market? Jordan Hu said that there are not many people who know this technology, and those who does, want to trade by themselves. Those people will think that it is the easiest way to control profits and losses. Jordan Hu described that those who can fight want to be soldiers. "But my strategy is that I am willing to be a weapon supplier."
Jordan Hu observes the digital changes in the risk control assessment system. (Xu Zhenhui / Photography)
Weekly Enhancement Releases
RiskVal now has nearly 60 people, all of whom are R & D and technical personnel; six of them are PhDs, and all others have PhDs and master's degrees. Jordan Hu and Quants discuss new ideas and hand them over to technical staff. In RiskVal's Manhattan office, engineers concentrate on work or exchange ideas. There is a space for pool tables, fitness equipment and massage chairs, which employees can use freely.
In addition, from the first day of the company established to the present, Jordan Hu insists on publishing product update reports every week, allowing customers to know the latest trading strategies and new features as soon as possible. Jordan Hu said that innovation is the core value of RiskVal. It has been difficult to do this without interrupting the release of reports for 19 years, but it has also kept RiskVal ahead.
For most people, RiskVal's platform is difficult to understand, and Jordan Hu shared the company's operations. Work goals are set weekly, and acceptance checks begin on Thursday and preliminary assessments are made: some projects are not completed, should they be postponed to next week's completion, which projects should be fully completed, etc. By Friday, all the checks are done and released.
Jordan Hu did not have a finance background, nor did he has a Master of Business Administration (MBA); RiskVal has not hired a marketing staff, nor has it been advertising. Financial engineering is a field that has only existed since 2000. But Jordan Hu, starting with his math major, succeeded on Wall Street.
Inspired by a former colleague
Jordan Hu recalled that when he left Solomon Brothers, he was a little confused about the future: Looking for another job or starting a business? Finding another job is not difficult, and Wall Street is well paid, but starting a business is risky.
Jordan Hu's colleague Dr. Bruce Tuckman during the Solomon Brothers was his mentor. After leaving Solomon Brothers, Tuckman was hired as a senior trading strategy consultant for other companies and now works for a major think tank in the United States. Tuckman not only helped Jordan Hu start his business idea. Even before Jordan Hu started his business a few years ago, Tuckman invites Jordan Hu to have a meal together every year, and sometimes he invites the Nobel prize winner in economics to join.
They usually find a quiet restaurant, where three or four people spend an evening to have a meal and chat. Tuckman and his friends would ask Jordan Hu questions, some of them are very difficult to let him think. Jordan Hu said: "They hope that I can go my own way. This deep interaction has benefited me a lot."
Winning awards will definitely raise fame
Regarding winning the prize, Jordan Hu said, "Before winning the prize, I never knew it was important."
The first prize was from Fin Extra, a well-known European journal of derivative credit products. "Fin Extra" observes market trends, talks to traders about risk control, and knows RiskVal indirectly. "Fin Extra" wants to know what RiskVal is doing, and why companies like JPMorgan have so many talented people but did not build their own systems.
"Fin Extra" visited Jordan Hu. Afterwards, the "Finextra Innovation Award for the RVCredit Solution" was awarded to reward RiskVal's creativity.
After winning this award, RiskVal became well-known in the financial industry gradually. Starting in 2008, RiskVal has won many awards. Winning the award is the affirmation and has built up RiskVal's reputation.
From 2016 to 2018, Jordan Hu won 50 Smart CEOs in New York for three consecutive years. New York is a startup center. Many people want to start a business. This award is dedicated to discovering CEOs and how they realize their dreams. Jordan Hu is the only CEO who has won awards for three consecutive years. In the third year, he told the organizer, "Give this award to other outstanding people. Don't give it to me anymore."
In 2017, Jordan Hu won a model for overseas youth entrepreneurship in Taiwan, and in 2018 won the Rock Award for Taiwanese businessmen overseas. Today, RiskVal is the bull of the Wall Street risk control system, and Jordan Hu has proven his strength.
Jordan Hu and his awards. (Xu Zhenhui / Photography)
Management is simple and transparent
Regarding management, Jordan Hu emphasized that managing enterprises should be simplified, and things should be resolved quickly; followed by transparency. For example, everyone in RiskVal knows how much each contract worth.
RiskVal is self-funded by Jordan Hu, without other investors, he establishes tacit understanding and confidence with each employee. In terms of salary and benefits, Jordan Hu said, "I know what employees want, and I give it to them."
Jordan Hu values interpersonal relationships. When the company was founded 19 years ago, the turnover rate was almost zero. Jordan Hu said that natural talents will be useful. As long as you make good use of everyone's expertise, there is always a way to find a suitable position in the company.
Five years ago, Jordan Hu discovered that if the company wants to continue to grow, the biggest obstacle is to face the zero employee turnover rate, which is good and bad. The good thing is that the direction is clear, and the bad thing is that some habits cannot be changed. Jordan Hu said that after he started to adjust, some senior employees left, but they had a good outcome after they left.
Future goals - Automated Trading
Jordan Hu likes the Fibonacci Sequence very much. This is a well-known mathematical method. The evolution problem starts from 0 and 1. The Fibonacci coefficient is obtained by adding the previous two numbers. , 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc. There are many phenomena in nature that can be explained by Fibonacci coefficients. In the fields of modern physics and chemistry, Fibonacci numbers have direct applications.
Jordan Hu's next goal is to hope that one day an automated transaction can be reached. Some financial engineers use the Fibonacci sequence to plan the transaction model, but there is no way to solve the problem he wants to solve. "I can vaguely see the answer, but I need someone who believes in this challenge to do it together."
As the company grew, RiskVal moved to its current office in 2011, and there is still plenty of space on the entire floor. Another office was opened in Princeton, New Jersey in 2019.
There is also a wall with patented design drawings of computer components, such as USB and Disk Storage System. Jordan Hu said that these important inventions that created modern science and technology are the core of technology and the crystallization of human wisdom in the computer era. He said, "We inherited the breakthrough innovations of our predecessors and stood on the waves and continued to move forward. These patterns are like photos of ancestors, which is very meaningful to me."