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How I Became a Quant (2007) [pdf]

engineering.nyu.edu

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Re: How I Became a Quant (2007) [pdf]

#81

Post by fragmede »

nzzn wrote: post #43
fragmede wrote: post #20

Earlier quoted context omitted.

Did you actually read them? I didn't go to NYC, but Money is fungible so it's a simple math problem. How much non-parasite good can you do making $50k/year * 10 years? Even if we ignore taxes and you donated your entire salary, that tops out at $500k worth. If instead you could make, say, $500k/year * 10 years, and then quit and form your own non-profit for $2,000,000 and do 4x as much good.

If you’re only make on average 500k/year after 10y — you’re not really in the game at all

Feel free to do more accurate math! I don't think you'd be doing $500k right out of college either, so it was intended to be a rough average. The person I know I'm finance is doing well over $1,000,000/yr, but I have no idea how average that is.

Re: How I Became a Quant (2007) [pdf]

#82

Post by stevenhuang »

bmitc wrote: post #52
stevenhuang wrote: post #22

Earlier quoted context omitted.

Everyone benefits with more efficient markets. It is easy to fall into the trap of thinking HFT/low frequency quant firms "leech wealth". You can get out of the trap by learning about what they do and the essential role they play in the proper functioning of our markets.

It's an intentionally naive position to say that places don't leech off of others. Even large places like Fidelity and Schwab that respect customers aren't just keeping people's money in vaults. They literally take your checking, savings, retirement accounts, etc. and make money off of them while they "sit". Firms specialize in intercepting trades and then placing trades faster than 99.9% of others. These institution…

It can both be true they provide a necessary service and that unfair financialization exists.

We are not in disagreement.

But it is ignorance to say the system would work better without any involvement of HFTs.

Re: How I Became a Quant (2007) [pdf]

#83

Post by keiferski »

Rzor wrote: post #64
francisofascii wrote: post #30

Earlier quoted context omitted.

"it's all just numbers really. Just changing what you're adding up. And, to speak freely, the money here is considerably more attractive." - Peter Sullivan in the movie Margin Call

I ended up rewatching that movie more than ten times a few months ago after I got stuck with a capped internet connection and not much to do online. It's one of those films where there isn't a single fucking scene wasted: everything plays out a little over a day, and the character dynamics and dialogue feel genuinely tight. Lots of great characters overall, but Jeremy Irons's John Tuld is just stellar in terms of pre…

It really is a perfect movie, in the sense of having precisely the right parts and nothing else.

Re: How I Became a Quant (2007) [pdf]

#84

Post by Agingcoder »

bee_rider wrote: post #46
Agingcoder wrote: post #21

Earlier quoted context omitted.

Im reasonably familiar with the exotics quant space. It’s essentially IT/data work - the days of sophisticated maths are mostly gone. There always was a lot of code, but these days for most people there’s little to no new maths. From what I’ve seen, post-2008 the job changed significantly, with more IT, less maths, more standardization - basically the job moved from bespoke everything to super industrialized. You’ll…

What happened? Is this a case of the actual job changing, or just title inflation? I’d expect the quants to be the ones doing the math and implementing the kernels…

Several things : immediately after 2008 less demand for exotics because clients were afraid of them, cutting costs rather than increasing revenue ( that’s industrialization with IT and standardization ) and more importantly, industry reaching some kind of maturity, with large quant libraries which are pretty stable these days.

Re: How I Became a Quant (2007) [pdf]

#85

Post by lordnacho »

fancyfredbot wrote: post #74
lordnacho wrote: post #67

Earlier quoted context omitted.

> The salesman can't tell you how to hedge the product. If you can't hedge you will lose that 5% upfront pretty fast. > You need quants and sales and trading. Which is why all banks have all three. I don't think anybody said you can just run without one of those. But it seems the magic is in spotting the fish, not hauling it in.

Spotting fish who you can overcharge is not really a sustainable business model. You can do it once but your colleagues will find out, move to a competitor, and next time they'll rip them off a bit less than you did and you'll have to rip them off less than that. There is, eventually, a shortage of dumb money. The sustainable way of making money involves competition, and this involves knowing the "right" price within…

No, the feedback loop isn't closed. The fish customer just keeps handing his spread to his favourite sales guy.

I've witnesses this several times, some trader always uses the same relationship, irrespective of cost. I've seen this both in terms of friends from a long time ago helping each other, family, or backhanders.

And so the real winner is that sales guy. I've known people climb to the very top of well known institutions on the back of relationships with just one hedge fund.

What you're describing is a sort of ideal market from an economics textbook.

Re: How I Became a Quant (2007) [pdf]

#86

Post by highfrequency »

Rzor wrote: post #58
highfrequency wrote: post #18

Earlier quoted context omitted.

Good instinct. A lot of the day to day is debugging nitty things, reconciling small differences in results, trying not to make dumb mistakes. Almost all attempts to do very smart theoretical novel work fail, often because of extremely mundane engineering and data issues.

>Almost all attempts to do very smart theoretical novel work fail, Unless you happen to be in a place like RenTech, perhaps?

There’s a great quote from Nick Patterson of RenTech who says that the most sophisticated technique they generally used was linear regression, and the main thing was avoiding stupid mistakes:

“I joined a hedged fund, Renaissance Technologies, I'll make a comment about that. It's funny that I think the most important thing to do on data analysis is to do the simple things right. So, here's a kind of non-secret about what we did at renaissance: in my opinion, our most important statistical tool was simple regression with one target and one independent variable. It's the simplest statistical model you can imagine. Any reasonably smart high school student could do it. Now we have some of the smartest people around, working in our hedge fund, we have string theorists we recruited from Harvard, and they're doing simple regression. Is this stupid and pointless? Should we be hiring stupider people and paying them less? And the answer is no. And the reason is nobody tells you what the variables you should be regressing [are]. What's the target. Should you do a nonlinear transform before you regress? What's the source? Should you clean your data? Do you notice when your results are obviously rubbish? And so on. And the smarter you are the less likely you are to make a stupid mistake. And that's why I think you often need smart people who appear to be doing something technically very easy, but actually usually not so easy.”

http://www.thetalkingmachines.com/episodes/ai-safety-and-leg...

Re: How I Became a Quant (2007) [pdf]

#87

Post by fancyfredbot »

lordnacho wrote: post #85
fancyfredbot wrote: post #74

Earlier quoted context omitted.

Spotting fish who you can overcharge is not really a sustainable business model. You can do it once but your colleagues will find out, move to a competitor, and next time they'll rip them off a bit less than you did and you'll have to rip them off less than that. There is, eventually, a shortage of dumb money. The sustainable way of making money involves competition, and this involves knowing the "right" price within…

No, the feedback loop isn't closed. The fish customer just keeps handing his spread to his favourite sales guy. I've witnesses this several times, some trader always uses the same relationship, irrespective of cost. I've seen this both in terms of friends from a long time ago helping each other, family, or backhanders. And so the real winner is that sales guy. I've known people climb to the very top of well known ins…

The situation you are describing definitely happens, people have their mates they like working with and a single relationship can make a whole career.

Normally though, such relationships do not involve the sales person charging significantly above market rates. The client usually has very strong incentives to reduce costs. While a single salesperson might build a career on a chummy relationship this isn't a sustainable approach for an entire firm to take because it is too unusual. The majority of the revenue is coming from client/sales relationships where the client is at least somewhat price sensitive and sufficiently savvy to get more than one quote.

Re: How I Became a Quant (2007) [pdf]

#88

Post by fancyfredbot »

bmitc wrote: post #61
e-master wrote: post #54

Earlier quoted context omitted.

I assume exotic derivatives (binary, asian, barrier options...) and structured notes that predominantly use above said derivatives (autocallables, barrier reverse convertibles, accumulators etc.)

Thank you. No matter how much I try to understand the financial system, there seems no end to the nomenclature. Do you or others know of any good references that help navigate this?

Patrick Boyle, early in his YouTube career, made some videos on exotic options. This is a lot more engaging and possibly more informative than reading Hull.

https://youtube.com/playlist?list=PLHC72UlhAthBEEAhoQwPdDaL_...

Re: How I Became a Quant (2007) [pdf]

#89

Post by fancyfredbot »

609venezia wrote: post #17
mathisfun123 wrote: post #13

Earlier quoted context omitted.

i don't know what the point of this book is - there's nothing rockstar about being a quant. not only do not all quants "generate alpha", even the ones that do are just overworked data scientists. ask anyone that actually works in the industry - fancy math is no longer a thing ("exotic option pricing"). so would "how i became an accountant" be just as interesting? how about (more accurately) would "how i became a data…

> ask anyone that actually works in the industry - fancy math is no longer a thing Huh? What happened? This is a very interesting claim I would love to hear elaborated

The days of doing some calculus, having a moment of brilliant insight, and writing down a pricing formula then getting paid millions probably only ever existed in people's imagination.

Fancy math definitely is part of derivatives pricing. However financial world has become too complicated for simple models. Adding things like the risk of counterparty default to your pricing equation quickly leads you into the world of equations without closed form solutions. The common approach these days is some kind of huge multi factor Monte Carlo model. These are still solving pricing equations but the challenge is more about numerical methods than brilliant algebraic gymnastics.

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