Audit & Business Advisory
The China Aviation Oil Debacle. Some lessons that should have been learned a long time ago
The China Aviation Oil Debacle
The China Aviation Oil Debacle. China Aviation Oil (CAO) announced in the fourth quarter of 2004 huge losses on its speculative commodity derivatives position. The position had been rolled over already several times, to avoid the realisation of mounting losses due to rising oil prices. The Company finally faced margin calls that it could no longer satisfy. This liquidity crisis triggered the disclosure of the problems. As was also often the case in the well-publicised derivatives disasters of the past, it were not the derivatives themselves that were to blame but rather a combination of a (speculative) strategy with inherent risks within a context of insufficient governance and risk control. We provide a simplified description of how CAO’s option strategy combined with their poor risk management procedures have led to this debacle. We also take this opportunity to review the principles of Good Governance and Risk Management.
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The China Aviation Oil Debacle A Brief Summary of the Facts
A Brief Summary of the Facts1 Initially, only swaps and futures were traded … Yet another year later, speculative trading in fuel options started
CAO, a Singapore company, had as core business ensuring the procurement of jet fuel (kerosene) for the airports in the People’s Republic of China. Initially, only swaps and futures were traded to help optimising this procurement duty. Later, on behalf of client airline companies, back-to-back option trading was started. Yet another year later, speculative trading in fuel options started. Among the circumstances that led to the unravelling climax at CAO, the following points are worth mentioning: • The speculative option trading started without it being properly encapsulated in risk management policies and senior management oversight. • The option contracts, some of which had complex features such as optional term extensions, were not valued on a best practice basis. In particular, time value was not considered. The company stuck to its valuation approach, despite the confirmations received from the counterparties that contained significantly different prices. • In the context of fair value accounting, the errors in the valuation of the open position, led to erroneous financial statements. • There were several roll-overs of loss generating positions, whereby options on bigger volumes were sold to generate sufficient cash to settle the losses on an existing position. We limit ourselves to the above succinct description of the facts, since the final words are far from being spoken at this point in time. In the present text, we will revisit some of the key ideas underlying risk management of derivative trading, being it for a corporate or a bank. Furthermore, by giving some insights in the valuation of some common derivative financial instruments, the aura of objectivity surrounding the notion of fair value is critically reviewed.
1 The description of the facts is based on material that is available in the public domain, including the report “Statement of the Phase I findings” by PwC, that was published on the website of the Company.
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The China Aviation Oil Debacle A Simplified Description of the China Aviation Oil Debacle
A Simplified Description of the China Aviation Oil Debacle … the leverage effect that option strategies can have and the corresponding need for flawless Good Governance and Risk Management processes …
In this first part we review the China Aviation Oil (CAO) option strategy and show how this strategy in combination with incorrect valuation resulted in huge hidden losses in a rising market. For the sake of clarity, we will make some strong simplifying assumptions. As a result we do not claim that this description faithfully describes the detailed facts and figures of what happened at CAO in 2004 that lead to their downfall. However this simplified example does provide a framework in which to explain the actions of CAO and the consequences. It also illustrates the leverage effect that option strategies can have and the corresponding need for flawless Good Governance and Risk Management processes for these strategies that will be reviewed in the second part. Before going into the details of the CAO option strategy it will be useful to review some basic facts on options.
A Primer on Option Valuation A call option is a derivative contract giving the Buyer the option to buy a certain product (the underlying) at a given moment in time (the expiry or exercise time) for a given price (the strike price). The underlying can be the price of a certain product – e.g. the price of a specific crude oil contract as published by the International Petroleum Exchange – in which case there is usually no delivery of the product, but a cash transfer from seller to buyer equal to the price at expiry minus the strike price (if positive). The price of an option is determined by market forces; it is where the bids from the Buyers meet the offers from the Sellers. In order to guesstimate the theoretical value of an option, assess the value of an option portfolio and set up a hedge, market players find it useful to use mathematical models. Under certain broad assumptions these mathematical models replicate the market prices fairly well. The best known model is the Black-Scholes model that has become the standard benchmark model for the options market. 2 3 It is convenient to break down the value of an option into two components: Option Fair Value = Intrinsic Value + Time Value
The Time Value reflects the value of the volatility of the
The Intrinsic Value is the value of the option if it would expire today (e.g. for a call option this is simply Max(0,S-K), where S is the price of the product now and K the strike price of the call). The Time Value reflects the value of the volatility of the market; it is a measure for the probability that the option will be worth something at expiry.
market 2 The Black-Scholes model is based on the no-arbitrage principle: it replicates the option that has to be valued by a portfolio of (dynamically changing) hedges and imposes that no arbitrage is possible between the option and its replicate. The total portfolio of option plus hedges then necessarily has a risk-free rate of return, which enables to calculate a value for the option. 3 Strictly speaking this is not the case; the Black Scholes model does not allow computing the value of an option ab initio. One of the input parameters of the Black Scholes model is the implied volatility, which is notoriously difficult to predict from first principles. As such the Black Scholes model does nothing more than translating option market prices into implied volatilities; a concept that traders feel familiar with.
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The China Aviation Oil Debacle A Simplified Description of the China Aviation Oil Debacle
An option with a non-zero Intrinsic Value is called In-the-Money (ITM). If the strike price is equal to the underlying price, then the option is called At-the-Money (ATM). ATM options have the highest Time Value. In all other cases, an option with a zero Intrinsic Value is called Out-of-the-Money (OTM). Fig. 1 shows the breakdown of an option value in a specific example. Option Value (Intrinsic Value + Time Value) for a European call option
Time Value for different times to expiry for the same option
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3.5 European call option 3 months to expiry Strike price = 55 $/bbl Impl volatility = 30 %
5
3.0 Time value ($/bbl)
option value ($/bbl)
6
4 3 2
2.5 2.0 1.5 1.0 0.5
1
Time value
Intrinsic value 0.0
0
50 50
51
52
53
54
55
56
57
58
59
forward price ($/bbl)
51
52
60 3 months
Source: Energy and Environmental Markets desk, Fortis Bank
53
54 55 56 57 forward price ($/bbl)
2 months
1month
58
59
60
5 days
Source: Energy and Environmental Markets desk, Fortis Bank
The China Aviation Oil Debacle … a text book example of how the combination of an incorrect option valuation method with a losing options trading strategy …
PwC’s report of the China Aviation Oil debacle is a text book example of how the combination of an incorrect option valuation method with a losing options trading strategy can lead to exponentially growing losses that can remain hidden for a long time. From PwC’s report it is possible to summarize the CAO options trading strategy as follows: • starting Q3 2003, CAO took a bearish view on oil markets (they were expecting oil prices to go down); • consistent with this view, CAO sold call options and purchased put options on Jet Fuel4; • these options were valued in their profit & loss accounts based on the Intrinsic Value only (i.e. not taking into account the Time Value); • with the market moving against their position, CAO restructured their books at 3 different times by repurchasing the call options sold earlier and selling call options with a longer maturity. With oil prices continuing to rise, CAO could not satisfy the resulting cash (margin) calls from the call option buyers and had no choice but to go public with their results. A full post-mortem is outside the scope of this paper (and the PwC report does not provide sufficient information for a detailed analysis). However it is possible to simplify CAO’s trading strategy and show the multiplicative effect this can have on the real losses while the CAO valuation based on Intrinsic Value kept showing a profit.
4 Some of the options purchased/sold by CAO were extendible options. These are compound options where the underlying is another option, i.e. an option on an option. This is a way to improve the premium of an option, by introducing a higher level of complexity. These options will not be considered in this paper; it is sufficient to say that they increase the leverage effect of the options trading strategy and will multiply the losses from the simplified example given here.
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The China Aviation Oil Debacle A Simplified Description of the China Aviation Oil Debacle
Our simplification of the actions undertaken by an entity X will be as follows5: • action 1: On 1st October 2003 X sells 100 OTM call option with expiry 1st April 2004; • action 2: On 1st March 2004 X repurchases the April 04 option and sells an OTM call option with expiry 1st July 2004; • action 3: On 1st June 2004 X repurchases the July 04 option and sells an OTM call option with expiry 1st November 2004; • action 4: On 1st October 2004 X repurchases the November 04 option and sells an OTM call option with expiry 1st January 2005. Note that X sells only OTM options, i.e. options with no intrinsic value and only time value. Fig 2. Shows the evolution of the Brent Futures price and the action points during that period for the different Brent contracts. Brent Futures prices ($/bbl) and timing of CAO actions 55 Action 4 50
Action 3
45 Action 2 40 Action 1 35 30 25 20 Jul 03
Oct 03
Jan 04 Apr-04
Apr 04 Jul-04
Jul 04 Nov-04
Oct 04 Jan-05
Source: Reuters and Energy and Environmental Markets desk, Fortis Bank
Moreover we will make the following assumptions: • All options are calls on IPE Brent Crude Oil Futures; • All options are traded at market mid prices. • The volume of options sold in 2, 3, and 4 is exactly sufficient to fund the repurchase of the options, i.e. at every restructuring or roll-over of the position there is a zero cash flow. • Volatility is fixed at 35 % and interest rates at 2.5 %. • All the calls sold are OTM by 5 % (i.e. the strike price is 5 % above the price of the underlying). • X values its option based on the Intrinsic Value only.
5 From now on we will replace CAO with X, in order to avoid any possible confusion that this represents a one-to-one description of the CAO activities. Let us remind the reader of the main simplifying assumptions: (1) we use IPE Brent i.o. Jet Fuel; (2) all options sold are 5 % OTM; (3) the initial option sale and each restructuring is done on a single day each and at the settlement price of that day; (4) Black-Scholes (with a fixed implied volatility and interest rate) is used to assess the market value of the options; (5) all options are plain vanilla call options (i.e. we do not take into account put options and/or extendible options).
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The China Aviation Oil Debacle A Simplified Description of the China Aviation Oil Debacle
These assumptions are sufficient to calculate the profit and loss of the trading strategy both using the Intrinsic Value as using the more realistic Option Value. Estimated Income from X’s options strategy
Date
Buy/Sell
# Contracts
Call expiry
Strike
Forward price
Option value
Intrinsic value
Time value
01 Oct 03
P&L X
Sell
100
01 Apr 04
27.46
26.15
1.65
0.00
1.65
01 Mar 04
Buy Sell
100 381
01 Apr 04 01 Jul 04
27.46 33.63
33.34 32.03
5.88 1.54
5.88 0.00
0.00 1.54
01 Jun 04
Buy Sell
381 997
01 Jul 04 01 Nov 04
33.63 39.18
39.08 37.31
5.49 2.10
5.45 0.00
0.04 2.10
01 Oct 04
Buy Sell
997 4,150
01 Nov 04 01 Jan 05
39.18 47.69
46.62 45.42
7.46 1.79
7.44 0.00
0.02 1.79
31 Oct 04
Buy
4,150
01 Jan 05
47.69
48.68
2.89
10,254 0.99 1.90 Final Settlement2,363
Fair value P&L
165
0
753
(423)
2,829
(1,926)
(7,276) (11,829)
Source: Energy and Environmental Markets desk, Fortis Bank
Evolution of Income form X’s option strategy in ‘000 $
15,000 10,000 5,000 0 -5,000 -10,000 -15,000 1 Oct 03
1 Mar 04
1 Jun 04 P&L X
1 Oct 04
31 Oct 04
Fair Value P&L
Source: Energy and Environmental Markets desk, Fortis Bank
… booking options at their Intrinsic Value has led to an explosive growth in options necessary to fund the business
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Table 1 shows the valuation of the resulting profit and loss account and the different times of the action points. It is calculated for a starting position of 100 lots (100,000 barrels). It shows that booking options at their Intrinsic Value has led to an explosive growth in options necessary to fund the business (a 41.5-fold increase in one year time). It also illustrates how this strategy shows a booked profit with this valuation method, whereas the fair value income is a large loss. This will eventually result in margin calls by the option buyers, who value the position on a fair value basis. For this relatively small position the fair value income leads to a loss of 12 million USD. It is clear that a larger position can result in margin calls that may be difficult to satisfy by the option seller/writer.
The China Aviation Oil Debacle A Simplified Description of the China Aviation Oil Debacle
The above simplified example shows how an option strategy with an initial relatively small risk can, when incorrectly valued, result in a chain of events that lead to large losses. This example does not have the pretension of reproducing the CAO debacle; but it does highlight a particular angle of what must have happened. The fact that CAO sold extendible options to attract better premiums had a leverage effect on the option values that could only have aggravated the problem. It is a long way from there to conclude that options are financial derivatives that have to be avoided at all price, and this is most certainly not a view that we would wish to advocate. On the contrary, options (and in particular options on volatile products such as commodities) can be very useful in implementing certain hedging and speculative strategies. The conclusion from this example is that the leverage effect of options make them in a sense potentially more risky than simple linear products (such as commodity swaps) and that flawless Risk Management and Good Governance are paramount in this case. This conclusion is not new, and these lessons should have been learned a long time ago. Nevertheless such “debacles� seem to happen every so often, making it important to review these principles of Risk Management and Good Governance. This will be done in the second part of this paper.
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The China Aviation Oil Debacle Principles of Good Governance and Risk Management
Principles of Good Governance and Risk Management ‌ the introduction of the demanding accounting standards FAS133 and IAS39 have reinforced these principles ‌
In this second part we review the principles of Good Governance and Risk Management for any business active in financial derivatives. We also discuss how the introduction of the demanding accounting standards FAS 133 and IAS 39 have reinforced these principles though not always welcomed by users. The literature is rich in different standards that codify the sound principles and common wisdom that underpin all risk management frameworks, be it the management of foreign exchange risk in a corporate, or the management of operational risks in the corporate actions department of a global custodian. Whatever the precise subject, a few guiding principles arise again and again and they are an important part of what we want to discuss below. Moreover, those principles are equally valid for a corporate as for a financial institution. As such, we will also not make the distinction between using the derivatives for hedging purposes, or for proprietary (speculative) trading. The objectives that one wants to achieve by engaging in derivative instruments may be different, yet the infrastructure to put in place (in all aspects) is largely the same. Many companies have recently had to confront some of the issues below head on, forced by the introduction of FAS 133 and IAS 39, two accounting standards that put recognition on the balance sheet of derivatives at their fair market value forward as the basic principle. The revaluation of those derivatives at every reporting date creates increased volatility in the income statement, unless the company can demonstrate that the derivatives are effective or natural hedges. Below, we will indicate where both those standards reinforce best practices in risk management and control environment for derivative usage. What are then, the most important of those risk management and governance principles for financial derivatives operations?
What does the company want to achieve in managing certain risks, using derivatives?
The strategic objectives and risk tolerance of the company are determined at the highest level in the organisation (Policy definition) What does the company want to achieve in managing certain risks, using derivatives? If the company engages in proprietary derivatives trading, what losses is the company willing to sustain, for instance in view of the target credit rating? Those are decisions that are ultimately the responsibility of the board of directors, since those decisions can have a significant impact on the shareholder value of the company. Not only should the board decide whether this activity fits within the overall strategy of the company from a conceptual perspective. The scale with which the company engages in this activity should also be decided (e.g. time horizon over which fuel price risk is hedged, capital provided to support speculative trading, etc.) Notice that in reality, this high level objective setting and risk tolerance definition will often come after the fact. Some derivatives transactions have taken place to hedge risks in a small volume, or some limited speculative trading has developed to test the depth of a new market, etc. It is important that those embryonic activities are picked up early and properly
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The China Aviation Oil Debacle Principles of Good Governance and Risk Management
formalized, or abandoned altogether if deemed inappropriate within the context of the company’s objectives or reputation. This requires that up to the highest level in the organisation, including the board, there are people who are sufficiently knowledgeable to identify such activity, analyse it in the context of the company’s other activities, and prepare the ground for a formal decision.
… objectives … must be woven into the fabric of the company’s daily operations …
Senior management has the responsibility to translate the policies into daily operations and to dedicate the necessary resources to this end It is obviously not sufficient that the objectives are fixed, they must be woven into the fabric of the company’s daily operations. This includes the definition of limit systems (on notional amounts, on Value at Risk, on Earnings Volatility, on target hedge ratios, etc), lists of allowed instruments and counterparties (include yes or no option structures?), identification of accredited traders who can commit the company, etc. All this must be duly formalized in operating procedures that translate the policy set by the board to the daily operational level. Apart from these internal control related aspects of putting in place the relevant infrastructure, there is also the purely logistical side of matters. This includes ensuring that all people involved are adequately trained and adhere to high ethical standards, making the necessary systems available, both from a front office (transaction) perspective as from a back office (control, reporting and accounting) perspective. In fact, the points below can be understood to be some highlights of the tasks that senior management must perform. In doing so, it must strike a delicate balance, between creating the adequate system of internal controls, without hindering the development of the business. Another challenge in this area, is the homogeneity of the implementation of the procedures over the different locations in which a multinational is active.
Policies and procedures are A department independent from the front office must be present in order to worth nothing without • follow up on the open position, including completeness of capture and valuation enforcement (mark-to-market); • assess compliance of the positions and strategies with the policies and procedures; • follow up on other risks related to the activity, e.g. credit risk. Policies and procedures are worth nothing without enforcement. Assessing whether the positions and the risks taken are in compliance with the policies and procedures starts from an accurate measurement of the positions and their inherent risk. Such measurement and assessment reside best in an independent department within the company that has distinct reporting lines from the front office. Maintaining this segregation of duties in smaller organisations comes at high cost, because volumes may not justify a heavy infrastructure. Again, it is the responsibility of senior management, and of the board, to make sure that the balance is well kept, including taking into account human relations between the people involved.
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The China Aviation Oil Debacle Principles of Good Governance and Risk Management
In multinationals that are constantly acquiring or selling subsidiaries, it is also a permanent challenge to maintain a complete and accurate overview (on a timely basis!) at the central level of activities in (derivative) financial instruments. In the early phases of IAS 39 impact studies and implementation exercises, such overview proved to be a significant hurdle. This is one of the examples, where IAS 39 has been put to good use to enforce more transparency and consistency in complex organisations. The challenges related to valuation were addressed above. It is however important to be aware that different types of (derivative) financial instruments, may require different degrees of technical sophistication to be built up in house. Valuation of forward exchange contracts, plain vanilla swaps, FRAs is not overly complicated. Again, IAS 39 and the requirements to assess the effectiveness of hedges, has led many corporates to develop those skills, sometimes supported by their banks for the supply of market data. An altogether more complex type of instruments are options (caps/floors, currency options, averaging features, binary features, etc). Spreadsheet based solutions to valuation are often no longer sufficient and vendor solutions are needed. A particular point to keep in mind when dealing with commodity contracts is that not all markets are equally well developed, and decisions on the time horizon for which forward prices are available and used in the valuation can have a significant impact on the value of the commodity contract and therefore also often on the company’s accounts under IAS 39/FAS 133. A meticulous control of the hypotheses applied in this domain of valuation is important in order to avoid model driven gains/losses being recognised in the accounts. Managing risks using derivatives often introduces new risks. For example, hedging a currency risk using forward exchange contracts suddenly introduces an exposure to the foreign interest rate (via the mark-to-market of the forward contracts) in the accounts. While this exposure is usually small in short term contracts, it could become significant for long dated contracts or in a currency that is subject to inflationary risks. Fixing your interest rate by entering in an OTC swap with a financial institution is only an effective hedge if the counterparty performs on the contract when needed (credit exposure). Clearly, a complete, some would say holistic, analysis of all the risks associated to the entire position (e.g. underlying exposure plus hedging instrument) is needed.
… ever more frequent and detailed disclosures …
Both internal and external reporting (financial statements) pertaining to the activity must strive for being best practice Over the past two decades the information technology revolution led investors and (stock market) regulators to demand ever more frequent and detailed disclosures on a corporate’s financial position, including (derivative) financial instruments. That those stakeholders probably not always fully grasp the cost associated with these demands for the corporate is not a relevant excuse not to strive for best practice. The peer group benchmark and the regulatory requirements are constantly changing, and the corporate must ensure that it is not lagging behind in these areas. However, since most of the information that regulators and investors are looking for is believed to be of importance for the management of the company, those costs should not be considered to be for external reporting purposes only. The information should be used for the management of the company as well, and the credibility of the external information is tightly linked to the way it is used internally, in the Management Information Systems.
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The China Aviation Oil Debacle Principles of Good Governance and Risk Management
‌ looking for the weaknesses in the own models is ‌ an important complement to any risk management and modelling activity
The assumptions underlying both the strategy and the valuation and risk measurement models should be challenged on a regular basis (stress testing) Using a more or less sophisticated financial model understood by only a few in the company, for risk analysis or valuation, entails in itself the risk of complacency. However complicated, models are always based on some simplifying assumptions, needed to make the problem mathematically tractable. Similarly, for example fuel usage forecasts in the airline industry, on which hedging programs are based, are themselves rooted in a particular conception of the functioning of the industry. All this implies that models and mathematical analyses that have served well for years can suddenly become meaningless in case of disruptive events, such as currency devaluations, terrorist attacks, market crashes, etc. Preparing for such eventualities, by deliberately looking for the weaknesses in the own models, is therefore an important complement to any risk management and modelling activity. Even though people might more easily believe the impossible, and have a tendency to dismiss the improbable, it is precisely for those improbable but disruptive events that stress testing should prepare the company. Having revealed what can happen under such circumstance, the company should decide if and how it will prepare itself for these improbable events in function of the risk appetite of its stakeholders and the costs involved.
Before trading in new instrument types is started, an analysis is conducted on the risk profile of the product, the appropriateness of its use, the capacity to handle the instrument operationally, including the accounting treatment It is an all too common story that management only learns about a new type of strategy when the first losses hit the income statement. Before any new type of instrument is used, like options with exotic features such as averaging, the company should formally assess whether the product suits the purpose of its risk management objectives. Beyond this judgement, it should also consider whether the company is operationally ready to start trading or using the instrument. Does the company know how to value the instrument? Can it be incorporated in the internal risk reporting? If it is economically speaking a hedge will the formalities of hedge accounting be achieved? It is clear that this analysis needs to be documented appropriately. At present, many corporates are relieved now that the scramble to be IAS 39 ready on time is over. Obviously, significant amounts of work are still needed, since these accounting standards are not one off events but require a recurrent effort. Whatever the shortcomings of both IAS 39 and its US-GAAP equivalent FAS 133 may be, they have helped enforcing some degree of formalisation in the risk management practices of the average corporate. The following table list eight areas of the control environment of derivatives trading operation and highlights whether they are reinforced by IAS 39 or FAS 133.
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The China Aviation Oil Debacle
Control Environment of Derivatives Trading Operation
Control Area Strategies, policies and procedures agreed by Senior Management, and endorsed by Board of Directors Reporting on and monitoring of derivative positions, activities, and exposures Controls over valuation
Reinforced by IAS 39? √ Policies and Hedge Documentation (√) √ Valuation principles become accounting rules
Procedures for measurement and management of sensitivity, and changes in valuation
√√ √√Effectiveness Testing
Measurement and Management of Counterparty Credit Risk exposure Robust trade execution procedures Avoidance of error and loss in transaction processing and settlement New products approval procedure
√ Can I account correctly for my new product?
Source: Deloitte
Conclusion Derivatives mishaps, such as the most recent one of China Aviation Oil, have nothing to do with the inherent dangerous character of derivative instruments. They are rather more often the consequence of bad governance and poor oversight, allowing ill-conceived and poorly defined strategies to run out of control. As in any financial management activity, well defined rules of the game may not guarantee exceptional results, but they create at least accountability so that realised returns can be assessed and understood within the set objectives.
About the Authors Frank De Jonghe is Partner at Deloitte, responsible for its Treasury & Capital Markets team in Belgium. The team is active in all areas of financial risk management, including valuation, IAS 39/FAS 133 accounting, securitisation, quantitative risk modelling, etc. It operates both as part of audit teams, and as independent advisers to non-audit clients. At present Frank teaches a course on Risk Management and Derivative Valuation at the University of Ghent, Belgium. Before joining Deloitte, Frank worked as a portfolio manager at ING and as internal auditor at Euroclear. Frank obtained a PhD in Theoretical Physics from the Katholieke Universiteit Leuven. Deloitte Frank De Jonghe (Partner) Tel. + 32 3 800 88 89 fdejonghe@deloitte.com Fortis Bank Energy and Environmental Markets Stany Schrans (Head) Tel. + 32 2 565 80 43 stany.schrans@fortisbank.com
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Stany Schrans is the Head of Energy & Environmental Markets in Fortis Bank. Stany joined Fortis Bank in March 2004 in order to expand the energy derivatives sales activity to include trading and to expand the service offering to the clients. Fortis is now active in the major financial energy & environmental derivatives markets in Europe, the US and the Far East, offering a wide range of energy risk management solutions to its clients. Prior to joining Fortis Bank, Stany worked for Electrabel in Brussels, where a.o. he set up the natural gas structured trading desk. He started his career with Shell as a researcher in Amsterdam, before joining Shell Trading as a physical crude oil trader in London and The Hague. Stany obtained a PhD in Theoretical Physics from the Katholieke Universiteit Leuven.
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