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Irwin T. Vanderhoof

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Irwin T. Vanderhoof, PhD, BS, FLMI, CLU, CFA, ACAS, AIA, FSA

Irwin T. Vanderhoof, was an actuary, educator, patent holder, and clinical professor of Finance at New York University. He conceived the application of a modified Monte Carlo method (a calculating method devised to develop the hydrogen bomb) for determining the worth of financial derivatives.

The unique adaptation, called the "quasi" Monte Carlo, for which Dr. Vanderhoof was awarded a patent (the second mathematical patent ever awarded), is important since Alan Greenspan, the then chairman of the Federal Reserve, estimated that the 1999 financial derivatives market was worth some $80 trillion. Before this modification the original Monte Carlo calculation was used. In 1992, Dr. Vanderhoof suspected that the quasi-Monte Carlo technique might work faster and more accurately. The quasi-Monte Carlo has since been used in a variety of applications, from finance to physics, but not to such extremely complex calculations as determining the worth of complex securities. It was a suspicion that was not shared by others. "Nobody believed in the early 90's that this could be superior to Monte Carlo," said Joseph F. Traub, a co-holder of the patent and a professor of computer science at Columbia University. So, Professor Vanderhoof arranged for Goldman Sachs to give Professor him a difficult problem -- figuring the value of a collateralized mortgage obligation, which is essentially a collection of 30-year mortgages whose worth is difficult to fix because of varying interest rates and unpredictable prepayments. Spassimir Paskov, Professor Traub's student, and the third patent holder, valued the mortgages using both Monte Carlo and quasi-Monte Carlo. "To our amazement, we found that quasi-Monte Carlo consistently beat Monte Carlo by a factor of 10 to 1,000," Professor Traub said.

Dr. Vanderhoof's career encompassed work at Metropolitan Life and United States Life Insurance Company. He helped found Standard Security Life in 1959, and moved on to become Executive Vice President and Chief Actuary of the Equitable Life Assurance Society of the United States in 1973 before retiring in 1989. In retirement, he provided consulting services to many prominent firms, including Goldman Sachs, Ernst and Young, Tillinghast, The Lutheran Brotherhood, and several insurance departments, founded his own actuarial consulting corporation, and served on the board of directors of several insurance companies. He was an active member of the Society of Actuaries for more than 42 years and served on its Board as well as chairman of the Life Research, Planning, and Research Committees. He was also a member of the International Congress of Actuaries and frequently presented papers at national and international meetings. He authored and co-authored numerous actuarial and finance papers and books, including Asset Loss and Bond Default which won the Biennial Award of the investment section of the Society of Actuaries. The paper Lyme Disease: Cost to Society, in the actuarial journal Contingencies, was coauthored with his daughter [Karen]. He was a member of the American Academy for the Advancement of Science for 46 years and was the Society of Actuaries representative to that group. As few may know, actuarial work is a recognized science.

Professor Vanderhoof's teaching career, spanning 28-years, included work at the College of Insurance in New York and as Professor of Finance at the Stern School of Business. He co-edited four finance books for the Stern School of Business at New York University, the last one was dedicated to him.

Irwin was a long-term member of the Contrarian Society, which is a “society of passionate brainstormers, renegade solution creators, and chance distributors to the dreamer.”

Dr. Vanderhoof was an associate editor for the insurance journal The Actuary, the actuarial journal Contingencies, and the scientific publication Journal of Spirochetal and Tick-Borne Diseases. Dr. Vanderhoof's professional designations included Fellow of the Life Management Institute, Chartered Life Underwriter, Chartered Financial Analyst, Associate of the Casualty Actuarial Society, Associate of the Institute of Actuaries (London), Fellow of the Society of Actuaries, and Senior Analyst of the New York Society of Security Analysts.

Dr. Vanderhoof earned a B.S. in physics from Worcester Polytechnic Institute, where he was a member of Alpha Tau Omega, a Ph.D. in Finance from New York University, and attended advanced courses at Clark University and the New School for Social Research. Dr. Vanderhoof died in 2000. Dr. Vanderhoof and his wife were diagnosed with Lyme disease.

Mr. Vanderhoof was fondly referred to as the “modern version of the Renaissance man,” with far flung interests and finding connections “among disparate areas of study.” He could discuss astronomy, the status of the space program, historical boxing championships, and Tuvan throat singing. His home library held a wide variety of books and magazines, which he frequently referenced. He took up the guitar at 45, horseback riding at 50, hang-gliding at 58, and earned his PhD in economics from NYU in his 60’s. When he retired from his job as Senior Vice President of Equitable Life Insurance Company, he decided to teach Finance at NYU’s Stern School of Business.

In 2012, Dr. Vanderhoof was posthumously awarded the honor of being selected as an “Insurance Legend” by the Society of Actuaries. Karen and her daughter Kristen accepted the award on behalf of Dr. Vanderhoof.
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