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The Quants Run Wall Street Now

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Re: The Quants Run Wall Street Now

#151

Post by kasey_junk »

dsacco wrote: post #149
kasey_junk wrote: post #145

Earlier quoted context omitted.

I actually think that exchange rebates reinforce my point. I've seen algos that would dump trading profit to get their trade levels into particular rebate levels for instance. Those algos would look bad under the metric of "never lost money trading" but look good under the metric of "holistic profitability". I just am annoyed when people site the former when talking about Virtu, both using it pejoratively or in prais…

In fairness, while I agree with your second paragraph, Virtu's example is a very neat case study for the limited dialectic purpose of demonstrating trading consistency , not necessarily profits. I have found that using profits for this particular debate isn't convincing for others, even if it shows a fuller picture; the actual win rate for trades is a simple and quantifiable point to refute comparisons to e.g. coin f…

But when people are talking about coin flipping, they are talking about real profit, not trade PnL. If your overhead to get into a trade is more expensive than the PnL on that trade, your consistent ability to make that trade is not a good thing, and that negative should be counted against your win rate wrt things like the efficient market hypothesis.

Again, I actually don't have strong opinions about coin flipping and trading being equivalent (and I think Virtu is likely a bad place to have that conversation vs a hedge fund because its not really an investment firm its an execution one) but I think claiming trading PnL refutes it is wrong.

Re: The Quants Run Wall Street Now

#152

Post by nullnilvoid »

xapata wrote: post #144
nullnilvoid wrote: post #116

Earlier quoted context omitted.

The rate for margin is yearly 8% for my brokerage account. The NASDAQ has gone up 15% since Trump got elected. If you use it wisely, it is great leverage. The poor don't even get to use it. They are completely shut out of the opportunity.

How much leverage do you think a poor person should take for speculating in the stock market? 15% annual return on nothing is still nothing. For most poor, doubling salary would have dramatically more impact than doubling their savings account.

> 15% annual return on nothing is still nothing.

This says how disconnected you are from the reality. Many Americans don't even make $100 a day. $10,000 investment plus $10,000 margin multiplied by 15% is significant for many people to buy food and pay rent.

Re: The Quants Run Wall Street Now

#153

Post by bubblethink »

nradov wrote: post #147
bubblethink wrote: post #128

Earlier quoted context omitted.

Well, crypto markets have much better odds than the lottery right now. Even without understanding the nitty gritties, if you just diversify in the top 10-20ish coins, and set sensible stop losses, you are in a very good position to come out ahead.

The Dutch tulip bulb market also had great odds in 1635. How did that work out? Stop loss orders are ineffective when markets lose liquidity and experience sharp price discontinuities.

That was an interesting read.

Re: The Quants Run Wall Street Now

#154

Post by chillee »

dsacco wrote: post #85
dluan wrote: post #65

My question for these new would-be quants is, how do you see your work? I know there are certain types of smart whizzes who see working for Google/Facebook/Amazon as some sort of intellectual step down, or where in finance the value to society is some handwavy "market-making" argument (depending on how philosophical you get), but presumably these types going into this are also tenure-track, research producing scienti…

Someone else mentioned pandas and AQR; I'll also mention BeakerX (Beaker Notebook) which was developed by Two Sigma: https://github.com/twosigma/beakerx You can read more about it here, too: http://beakernotebook.com Jane Street is also pretty awesome - they open sourced their in-house standard library for OCaml, called Base: https://github.com/janestreet/base (they use a lot of OCaml).

And to be clear, although Base is a more recent alternative, Core: https://github.com/janestreet/core has been the standard library for Ocaml for a while.

Re: The Quants Run Wall Street Now

#155

Post by kahnjw »

exogeny wrote: post #115
dluan wrote: post #65

My question for these new would-be quants is, how do you see your work? I know there are certain types of smart whizzes who see working for Google/Facebook/Amazon as some sort of intellectual step down, or where in finance the value to society is some handwavy "market-making" argument (depending on how philosophical you get), but presumably these types going into this are also tenure-track, research producing scienti…

I know more than a few dudes who work on Wall Street, most of whom graduated EE or CS from Carnegie Mellon/MIT/Harvard. Most of them view it as a mercenary job, nothing more. They don't give a shit about finance itself, but they enjoy the money, they enjoy solving problems - especially ones that are seen as impossible - and obviously they also enjoy the deep technical aspects of the job as well. It scratches a lot of…

If you really are a talented machine learning specialist, you don't have too much to compete with in San Francisco. A lot of "ML engineers" and data science people in SF dont actually have the background or expertise to call themselves career machine learning specialists. They take free courses and started using tensorflow once it blew up. I know because I was one of those people (fwiw im going back to school to actually learn the fundamentals now).

Also, I know people in the situation you describe, and its a grind like every other bonus incentivized gig on wall street. People may tell you otherwise, but they're probably sugarcoating. I know a few people who burned out early and started their own companies, and a couple who are continuing the slog for huge bonus payouts. The no free lunch theorem holds true.

For me, I'll finish up this degree and see where things are headed. I'm definitely not set on SV or WS yet, but it'll probably be one or the other.

Re: The Quants Run Wall Street Now

#156

Post by princeb »

princeb wrote: post #135
tptacek wrote: post #46

Earlier quoted context omitted.

What's the "high math" we're talking about here? Stochastic calculus?

for index funds the core problems are estimating risk and return, minimizing effect of uncertainty and std err on portfolio tracking, and fast optimization for large portfolios (>1000 assets). these are fairly long term problems so stochastic calculus not too useful here. portfolio risk is a very classic stats field.

just as an addendum.

it's not really clear that the math is "high" from the above comment but portfolio management, even the really boring sounding ones like index replication, uses the entire gamut of "high mathematics": robust and Bayesian statistics, non-parametric statistics, extreme value statistics, signal processing, numerical optimization, etc.

Re: The Quants Run Wall Street Now

#157

Post by nialo »

bmpafa wrote: post #123
tptacek wrote: post #72

Earlier quoted context omitted.

There's nothing handwavy about the liquidity argument. Improving liquidity reduces the cost of trading for almost everyone in the market and thus makes almost everyone just a little wealthier. That means ordinary people, like schoolteachers and custodians, retire with a bit more money, and are a bit more comfortable; it means lots of people can donate just a bit more money to charitable causes without crossing whatev…

I think that, in terms of social value, the point of diminishing returns for market making and liquidity has long since passed, especially wrt social value for Avg. Joes & Janes. I def. don't hold Facebook etc in a much higher regard here, but if we're talking about brain drain from socially useful fields, I don't think anyone can credibly argue that finance (esp. HFT et al) provides any meaningful social value. In f…

This is somewhat self correcting.

HFT firms are make money by taking a spread, which is effectively the cost of making a single trade. As they compete and get better and better at there jobs, this spread well be reduced, the amount of money available to pay for the best and brightest programmers will come down, and they'll suck fewer of them away from other parts of the economy.

The point being, the further they go past this 'point of diminishing returns', the less money they can possibly make. To the extent that HFT is a zero sum game, there will always be a limit on how much money they can spend.

(I believe but cannot prove that this limiting effect has already started, HFT firms are consolidating and making thinner margins than they used to)

Re: The Quants Run Wall Street Now

#158

Post by freyr »

exogeny wrote: post #115
dluan wrote: post #65

My question for these new would-be quants is, how do you see your work? I know there are certain types of smart whizzes who see working for Google/Facebook/Amazon as some sort of intellectual step down, or where in finance the value to society is some handwavy "market-making" argument (depending on how philosophical you get), but presumably these types going into this are also tenure-track, research producing scienti…

I know more than a few dudes who work on Wall Street, most of whom graduated EE or CS from Carnegie Mellon/MIT/Harvard. Most of them view it as a mercenary job, nothing more. They don't give a shit about finance itself, but they enjoy the money, they enjoy solving problems - especially ones that are seen as impossible - and obviously they also enjoy the deep technical aspects of the job as well. It scratches a lot of…

> very high prestige... Wolf of Wall Street... ego... cocaine

The lifestyle appeals to some, but not all, and Wall Street's "very high prestige" doesn't really exist outside NYC and its immediate neighbors. For most people, finance is associated with greed-fueled, drug-addled sociopaths who have to pay for sex and companionship, since that's what's portrayed in "Wall Street," "Wolf of Wall Street," the news, etc., and they don't associate that with prestige.

There are a lot of cautionary tales about Wall Street for a reason. Some in finance get out alive, others end up washed up or burnt out, barely maintaining employment, battling chronic depression due to years of abusing their brain chemistry. A million dollar bonus would be nice, but the other stuff I can do without.

Re: The Quants Run Wall Street Now

#159

Post by xapata »

nullnilvoid wrote: post #152
xapata wrote: post #144

Earlier quoted context omitted.

How much leverage do you think a poor person should take for speculating in the stock market? 15% annual return on nothing is still nothing. For most poor, doubling salary would have dramatically more impact than doubling their savings account.

> 15% annual return on nothing is still nothing. This says how disconnected you are from the reality. Many Americans don't even make $100 a day. $10,000 investment plus $10,000 margin multiplied by 15% is significant for many people to buy food and pay rent.

Oh boy. Your criticism is that I overestimate wages and your counter-example is a $10,000 investment? "Nearly half of Americans would have trouble finding $400 to pay for an emergency" (https://www.theatlantic.com/magazine/archive/2016/05/my-secr...). How are these sub-$100 per day folks going to scrape together $10,000 for investing?

Re: The Quants Run Wall Street Now

#160

Post by nullnilvoid »

xapata wrote: post #159
nullnilvoid wrote: post #152

Earlier quoted context omitted.

> 15% annual return on nothing is still nothing. This says how disconnected you are from the reality. Many Americans don't even make $100 a day. $10,000 investment plus $10,000 margin multiplied by 15% is significant for many people to buy food and pay rent.

Oh boy. Your criticism is that I overestimate wages and your counter-example is a $10,000 investment? "Nearly half of Americans would have trouble finding $400 to pay for an emergency" ( https://www.theatlantic.com/magazine/archive/2016/05/my-secr... ). How are these sub-$100 per day folks going to scrape together $10,000 for investing?

Anywhere below $25,000 does not get the opportunity to use the margin. $10,000 is still far from hoop. $100 per day will get you $2,500 per month conservatively. For a few months of tight pants, you will be able to save enough for $10,00-. You are missing the point here. It is about the principle. Everybody is created equal and should get equal opportunities (at least in terms of law).
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