How I Became a Quant by Richard Lindsey and Barry Schachter
This is like MyLifeAsAQuant re-told a bunch of times and edited by a blind monkey. Certain essays stand out: primarily those by Neil Chriss, Andrew B Weisman, Cliff Asness, Julian Shaw, and Andrew Sterge; most notably for the apparent breadth of their careers that they feel able to talk about details of things that no longer matter to them.
When someone lives in a competitive market and only knows some things which they are actively exploiting, well, they aren't going to share much and their stories consequently have nothing to them.
Patience is not a virtue to which I subscribe and, at the beginning of my junior year of high school, I informed my guidance counselor that I intended to double up on classes and graduate a year early.
To further show we were not trading on short-term information, our orders would have a couple of substitutes. When an order was executed, the other orders were cancelled. Traders who tried to front-run such orders could face the equivalent of an air pocket.
After watching the corporate loan market become commoditized due to intense competition and disintermediation in the capital markets, many commercial banks seriously considered changig their strategic focus. Some leaders such as Bankers Trust and JP Morgan underwent a fundamental transformation from a commercial bank to trading institutions. As with any transformation of this magnitude, the process was difficult and required strong commitment by senior management.When a political process involves a model, you can be sure they're cute and say the right thing.
Raroc models, used to make the risk-adjusted return from different businesses or loans directly comparable, were developed by these leading institutions in an effort to sharpen their strategies and build the commitment of senior management.
When I had told my scientific advisor Benedikt (Dick) Gross that I was leaving Harvard to go to Wall Street I had been extremely nervous. I literally had no idea what to expect -- disapproval? Banishment?...
With Dick's blessing, I officially took a year's leave of absence with the understanding that I could return if my year away inspired me to be a mathematician.
The majority, especially those successfully operating within large financial institutions, are more appropriately considered outside the boundaries of a meritocratic framework. Rather, one should consider the pack-dynamical framework espoused by Cesar Milan, the renowned National Geographic Channel Dog Whisperer. In short, learn to be calm-assertive and develop your scent-marking and dominance behavior patterns.
The basic performance enhancement tool kit consists of: (1) smoothing; (2) selling volatility (i.e. taking in premium while assuming the potentially significant risk of a low probability event); and (3) doubling up when you're wrong...
Such corrections (academic, not practical) explicitly ignore the most frightening, career defining, effect of smoothing; the big honking loss associated with having to sell a boatload of toxic securities in a short period of time when all your erstwhile buddies know what you're trying to do.
Second, and I have seen this repeatedly in my career, while a business appears to be making money there is little appetite for analysis of the apparently golden goose.
mean-variance VAR is hard to audit but historical simulation is easy to audit. By "audit" I don't mean what audit departments do. I mean explaining to an irate and skeptical trader exactly why you think his or her portfolio is as risky as you say it is.
as a rule, the quantitative firepower applied to problems in finance is inversely proportional to the amount of money at stake. For example, exotic derivatives trading desks get lots of quantitative attention, but the risk exposures of exotic derivatives desks are dwarfed by the credit exposures of the same banks, which are only now receiving quant attention thanks to the requirements of Basel CAD (Capital Adequacy Directive) II. In turn, these credit exposures are dwarfed by those of pension fund portfolios, which are run by amateur trustees with advice from actuaries who know little about finance (hence, the pensions crisis)good rule, bad example. Diminishing returns to capital says it all.
Barr (Rosenberg) had sold BARRA to Ziff-Davis, a media conglomerate, in 1981, and convinced it to invest in building the next generation of equity risk models. After five years, Ziff was frustrated that the new models were not producing enough revenue and wanted to sell the cmopany... after a number of potential buyers got scared off, the employees ended up buying back the frim for approximately the same pirce it had sold for five years previous...
I was lucky enough to be given a chance to buy some stock early on, and as a result, had a nice windfall when BARRA went public in 1991. But going public changed the firm. A bunch of senior people all of a sudden got liquid and started working less hard. the
The Quotrons were so alien to Wall Street types that they rearranged the QWERTY keyboard to be ABCDE. Schumpeter was right about capitalism being a process of creative destruction.