Graduation Assignment Interest Rate Hike Probability Models

Are you looking for a challenging graduation assignment or organization where you can do research? PGGM and MN offer you the opportunity to develop yourself, together with the best professionals in the field.

This assignment is part of the unique Academic Excellence Program (AXP). This program is a cooperation between MN and PGGM, two leading Dutch pension fund service providers. Students will get the opportunity to work alongside investment professionals, collaborate with other students and learn about institutional investing. On regular AXP-days all students in the program will come together in The Hague or Zeist to share ideas, learn from each other, attend presentations from investment teams and discuss job opportunities.

Since the outbreak of the COVID-19 pandemic, central banks worldwide have increased interest rates as a strategy to combat inflation. These central banks possess several tools, depending on their monetary policy, to influence interest rates. One of these tools involves setting their own deposit rate. Banks and other large financial institutions are able to lend and deposit funds at this deposit rate. The main objective of central banks through this deposit rate is to manage inflation and uphold price stability.

Interest rates play a pivotal role in determining the viability of an investment. The concept of the risk-free rate is integral in valuating various assets like bonds, equities, and real assets. This rate influences valuation methods such as bond pricing models and dividend discount models. Additionally, these investments generate cashflows, such as coupon and dividend payments. Often, these cashflows cannot be immediately reinvested in the principal asset. To optimize returns, they can be directed towards short-term instruments with payoffs tied to short-term interest rates.

Hence, for investors and traders, anticipating future interest rates and central bank actions is crucial. The market itself predicts potential rate increases or decreases by pricing specific derivatives in distinctive ways. These derivative contract prices offer insights into the market’s perceptions of future central bank actions. This insight can be either explicit, as seen in ECB dated OIS swaps and Fed Funds futures, or implicit, as in inflation swaps.

For this assignment, the main location will be PGGM in Zeist where you will be part of the Trading Analytics team. You are expected to be in the office about 50% of your time. This internship should be scheduled within the first half year of 2024.

For these assignments we are looking for ambitious students with:

• Quantitative background (e.g., Econometrics, Mathematics, Financial Engineering, etc.).
• Programming skills in Python.

Are you looking for a challenging graduation internship to develop yourself? Do you want to work in one of the best working environments in the Netherlands? Then we invite you to join our motivated enthusiastic team.

• Travel allowance.
• A monthly internship allowance.
• The opportunity to gain work experience and develop your skills.
• A great team made up of the best professionals in the business!