Part 1: Nicola Leuenberger (Graduate MSc in Banking and Finance 2021, currently in a graduate programme at Zürcher Kantonalbank, winner of the SwissLife award for the best Master’s thesis in Switzerland)
What did you find out in your research paper?
We use machine learning algorithms to predict credit defaults and compare them with classical models used today by practitioners. Our research shows that modern machine learning algorithms are better than traditional methods at prediction periods of more than one year. No one has systematically investigated this before.
Why are your findings relevant?
Accurately estimating credit defaults is very crucial for both banks and investors. A bank wants to "price" a risk correctly. Banks often use traditional statistical methods to estimate risk - not machine learning algorithms. But correct predictions of default are essential for investors too. A bond investor, for example, expects a higher return for bonds with higher expected default rates.
How does a master's thesis become a publication in a peer-reviewed journal?
After submitting and presenting my master's thesis, my supervisor, Prof. Dr. Fabio Sigrist, suggested publishing the work in a journal. Fabio supported me considerably in rewriting the thesis into a paper ready for publication. In particular, we had to be more concise in communicating our key findings. Fabio also added another quantitative model to the paper. As soon as the article was ready for publication, we looked for a suitable journal with a good reputation. I am very pleased that we made it into the European Journal of Operational Research (EJOR), a top journal.
How did you experience the peer review process?
After submitting the article, we received valuable feedback from the peer reviewers. Fabio took the lead on the entire process and was the primary contact for the peer reviewers. He kept me informed throughout the whole process. I was surprised about the long period from the finished paper to publication. We first submitted our article in September 2021, but the publication did not take place until June 2022.
What did your education in the MSc in Banking and Finance contribute to the publication?
The MSc in Banking and Finance provided me with the necessary methodological knowledge for an academic publication. Throughout the master's program, I greatly appreciated the dialogue with lecturers. The close and appreciative supervision made a publication possible in the first place.
What did you learn from writing a thesis for your professional future?
The work, but also the entire master's program, helps me in my everyday life to approach complex problems in a structured way. I have also realized that with the necessary perseverance and high motivation, you can also deal with topics that seem very complicated and difficult to understand at first glance.