An interesting 50 minute documentary on Quants and their role in the financial sector today. Are quants and their models responsible for the economic crisis recently experienced in America (and the globalized world economy?) What is the black box?
Granted- my eyes glaze over when they whip out the math equations. I will never be a quant- Math is not my first language. I’m currently learning the terminology of the financial world that the term ‘quant’ resides in. These concepts are not out of my grasp- and I look forward to fluency with the associated lingo.
The video is pretty simple to understand and has some beautiful moments:
“I will never sacrifice reality for elegance without explaining why I have done so.”
A quote from the ‘Hippocratic Oath’ of Hedge Fund Quants.
This oath is enjoyed by Jon Stewart: Click on the image below for a link to business week’s coverage on Jon Stewart’s interview of Scott Patterson or the link below for the direct video link. Highly recommended. About 7 minutes long.
Jon Stewart and Scott Patterson
Some notes on the documentary:
“We’re talking about trading at the speed of light.”
What is a black box? A black box is just something that has some kind of formula inside that takes in lots of data, which might be stock prices and other information, and it tells you what to trade/buy/sell. “My favorite is google search terms; trading based on what people are searching for.” (40:10)
The black box is hard for the human mind to wrap itself around, to understand what is really going on.
High frequency is concerned with price rather than value.
News reading algorithms- human interaction is divorced from the light-speed transactions that programs perform
Deutschebank is the only large firm left in Wall Street. Today “there are almost no large firms headquartered in the neighborhood that was the cradle of American finance. Only the New York Stock Exchange.” These firms are all moving to NJ where it is cheaper.
Notes from the Jon Stewart interview:
Scott Patterson is a staff reporter at the Wall Street Journal.
Who are ‘the quants?’ Mathematicians, physicians, etc who have figured out, using math and computer skills, ways to price securities on the stock market and make big bets.
‘The Wall Street express lane’- There is a wall street that is for general traffic, and then there is this express lane where people are making billions of dollars, capitalizing gain, and then socializing their losses amongst the slower lanes (when s*** hits the fan.)
Hippocratic Oath- Jon Stewart’s favorite thing! “I will remember that I didn’t make the world, and it doesn’t satisfy my equations.”
Dark Pools- an off exchange market where stocks trade in the dark, regulators don’t really know what is going on in them,
(Funny that the other Scott Patterson is Luke from Gilmore Girls. I wonder how he’s doing these days…)
“hay gurl”
#Nerdalert 