Isn't veyron a quant (or someone who works in finance)? I'm hoping to see a response from him/her.
Good books for hackers interested in quant finance?
11–20 of 62 posts
Re: Good books for hackers interested in quant finance?
#12Two recommendations: "Options, Futures, and Other Derivatives" by John Hull and "Dynamic Hedging" by Taleb.
Re: Good books for hackers interested in quant finance?
#13The Origin of Wealth:
Evolution, Complexity, and the Radical Remaking of Economics http://www.amazon.com/Origin-Wealth-Evolution-Complexity-Eco...
don't let the false prophets of equilibrium theory and efficient market theory bend your ear too far ;)
if you get into looking for a job, there are a few books that list common questions for quant jobs also...
Re: Good books for hackers interested in quant finance?
#14I thought the last crash basically trashed Quants and the idea you can model financial system :) If you are looking into getting into high frequency trading take note that the world's exchanges are changing to crack down on some of the practices.
Disclaimer: I'm not a quant and don't know where to source data on this topic. But from what I'e read, the size of the derivatives market was approximately 5-6X global GDP in the mid 00's. Now, it's over 20X global GDP. If that market ever crashed, we'd be looking back at the crash of '08 as 'good times'.
those numbers are really bad measures of risk. those are probably notionals on derivatives. if you're trading a swap, the notional may be 100B, but the amount actually at risk may be something like 10 bps, which is just 100MM.
Also, its not like if the market crashed, all of the value of the derivatives go to zero. Derivative holdings always have counterparties. If you make 100MM, someone else loses 100MM and vice versa. this isn't foolproof, as there is counterparty risk, but it makes the system a lot more stable than your statistics make it seem.
TLDR: The total risk of the derivative market is nowhere near 20X GDP.
Re: Good books for hackers interested in quant finance?
#15Trading and Exchanges: Market Microstructure for Practitioners. http://www.amazon.com/Trading-Exchanges-Market-Microstructur... I'm finding this a more interesting and detailed read than _Capital Markets for Quantitative Professionals_. For instance, the book traces through everything that happens when placing, executing, and settling typical trades. On the other hand, I've taken the Canadian Securities Course, so pe…
Trading and Exchanges was my detailed introduction to what really happens in the markets. I wish I could find a similarly detailed and coherent book on corporate actions.
It's a few years out of date, but not painfully so. Madoff was still a huge market maker, not a scandal, and it makes no mention liquidity rebates.
Edit: I should add that I had no trading background before reading the book, I was just an engineer at a finance startup who still thought "order" and "trade" were synonyms.
Re: Good books for hackers interested in quant finance?
#16I thought the last crash basically trashed Quants and the idea you can model financial system :) If you are looking into getting into high frequency trading take note that the world's exchanges are changing to crack down on some of the practices.
Disclaimer: I'm not a quant and don't know where to source data on this topic. But from what I'e read, the size of the derivatives market was approximately 5-6X global GDP in the mid 00's. Now, it's over 20X global GDP. If that market ever crashed, we'd be looking back at the crash of '08 as 'good times'.
Thats kind of misleading. First those figures are probably notional underlying, which doesnt mean much. Second contracts have a buyer and a seller, so net value is zero. So it does not work like a stock market crash destroying (presumed) wealth.
They should be teaching kids the basics of this stuff in schools...
Re: Good books for hackers interested in quant finance?
#17Are you really interested in learning quant finance (learning how to mathematically model various parts of financial markets, pricing/measuring risk of specific instruments, etc.) or are you interested in programming systems for the financial industry (trading/risk/compliance/banking/etc)?
This book, "Algorithmic Trading and DMA: An introduction to direct access trading strategies" (http://www.amazon.com/Algorithmic-Trading-DMA-introduction-s...) is pretty darn good if you are a programmer. However, if you really meant "quant finance," then others can give you better suggestions :)
edit: I just remembered, Paul Wilmott and Hull have several introductory books if you are interested in what is usually called "quantitative finance." This means how to price options, futures, etc. From what I recall, this does NOT mean using statistical correlations to trade two similar stocks, making market-making models, etc.
Re: Good books for hackers interested in quant finance?
#18I thought the last crash basically trashed Quants and the idea you can model financial system :) If you are looking into getting into high frequency trading take note that the world's exchanges are changing to crack down on some of the practices.
High frequency trading and quantitative trading aren't the same thing. High frequency is very basic math and a lot of technology to make trades happen as fast as possible. Low latency becomes difficult when you're running complex math on real time data. HFT is generally used by market makers. HFT is the next evolution of day-trading, since all trading is trying to react to news quicker.
Quantitative finance is very complex math used to model and backtest data. It is used by hedge funds, long-term traders, and shops that analyze data to find securities that they believe are mispriced.
(This is obviously a highly simplified description of the field.)
Re: Good books for hackers interested in quant finance?
#19I thought the last crash basically trashed Quants and the idea you can model financial system :) If you are looking into getting into high frequency trading take note that the world's exchanges are changing to crack down on some of the practices.
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Re: Good books for hackers interested in quant finance?
#20I thought the last crash basically trashed Quants and the idea you can model financial system :) If you are looking into getting into high frequency trading take note that the world's exchanges are changing to crack down on some of the practices.
The news blurbs I see make me think more and more exchanges around the world actually welcome HFT volume. Exchanges in Latin America, for example, are quickly modernizing to allow automated traders to come in.
Remember, exchanges benefit from greater volume (more fees).
With regards to the quants being trashed, you will always need people who can rigorously describe a system (I do realize that rigor and accuracy are different). The quants are not going anywhere :)