±1±: Now is the time The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It Order Today!
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Great Deal :
$13.97
Date Created :
Jun 24, 2010 22:21:58
Over All Rating Reviews :
Great Deal :
$13.97
Date Created :
Jun 24, 2010 22:21:58
--Warren Buffett
In March of 2006, the world’s richest men sipped champagne in an opulent New York hotel. They were preparing to compete in a poker tournament with million-dollar stakes, but those numbers meant nothing to them. They were accustomed to risking billions.
At the card table that night was Peter Muller, an eccentric, whip-smart whiz kid who’d studied theoretical mathematics at Princeton and now managed a fabulously successful hedge fund called PDT…when he wasn’t playing his keyboard for morning commuters on the New York subway. With him was Ken Griffin, who as an undergraduate trading convertible bonds out of his Harvard dorm room had outsmarted the Wall Street pros and made money in one of the worst bear markets of all time. Now he was the tough-as-nails head of Citadel Investment Group, one of the most powerful money machines on earth. There too were Cliff Asness, the sharp-tongued, mercurial founder of the hedge fund AQR, a man as famous for his computer-smashing rages as for his brilliance, and Boaz Weinstein, chess life-master and king of the credit default swap, who while juggling billion worth of positions for Deutsche Bank found time for frequent visits to Las Vegas with the famed MIT card-counting team.
On that night in 2006, these four men and their cohorts were the new kings of Wall Street. Muller, Griffin, Asness, and Weinstein were among the best and brightest of a new breed, the quants. Over the prior twenty years, this species of math whiz --technocrats who make billions not with gut calls or fundamental analysis but with formulas and high-speed computers-- had usurped the testosterone-fueled, kill-or-be-killed risk-takers who’d long been the alpha males the world’s largest casino. The quants believed that a dizzying, indecipherable-to-mere-mortals cocktail of differential calculus, quantum physics, and advanced geometry held the key to reaping riches from the financial markets. And they helped create a digitized money-trading machine that could shift billions around the globe with the click of a mouse.
Few realized that night, though, that in creating this unprecedented machine, men like Muller, Griffin, Asness and Weinstein had sowed the seeds for history’s greatest financial disaster.
Drawing on unprecedented access to these four number-crunching titans, The Quants tells the inside story of what they thought and felt in the days and weeks when they helplessly watched much of their net worth vaporize – and wondered just how their mind-bending formulas and genius-level IQ’s had led them so wrong, so fast. Had their years of success been dumb luck, fool’s gold, a good run that could come to an end on any given day? What if The Truth they sought -- the secret of the markets -- wasn’t knowable? Worse, what if there wasn’t any Truth?
In The Quants, Scott Patterson tells the story not just of these men, but of Jim Simons, the reclusive founder of the most successful hedge fund in history; Aaron Brown, the quant who used his math skills to humiliate Wall Street’s old guard at their trademark game of Liar’s Poker, and years later found himself with a front-row seat to the rapid emergence of mortgage-backed securities; and gadflies and dissenters such as Paul Wilmott, Nassim Taleb, and Benoit Mandelbrot.
With the immediacy of today’s NASDAQ close and the timeless power of a Greek tragedy, The Quants is at once a masterpiece of explanatory journalism, a gripping tale of ambition and hubris…and an ominous warning about Wall Street’s future.
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±1±: Best Buy Lofty Mathematical principles applied to finances and real-life can make for exciting reading. First example: Ariel Rubinstein had been toiling through an article on how to apply mathematics to games; and at length the economist found himself, as the sharpness of his focus waned, seeking respite from the tedium in Edgar Allan Poe's short story "The Purloined Letter." But the economist's work, it seemed, wouldn't let him rest. For in the middle of the detective story, Poe launched into an analysis of mathematics and game theory! Rubinstein read in Poe:
"I knew one about eight years of age, whose success at guessing in the game of `even and odd' attracted universal admiration. This game is simple, and is played with marbles. One player holds in his hand a number of these toys, and demands of another whether that number is even or odd. If the guess is right, the guesser wins one; if wrong, he loses one.
"The boy to whom I allude won all the marbles of the school. Of course he had some principle of guessing; and this lay in mere observation and admeasurement of the astuteness of his opponents. For example, an arrant simpleton is his opponent, and, holding up his closed hand, asks, `are they even or odd?' Our schoolboy replies, `odd,' and loses; but upon the second trial he wins, for he then says to himself, `the simpleton had them even upon the first trial, and his amount of cunning is just sufficient to make him have them odd upon the second; I will therefore guess odd;' -- he guesses odd, and wins.
"Now, with a simpleton a degree above the first, he would have reasoned thus: `This fellow finds that in the first instance I guessed odd, and, in the second, he will propose to himself, upon the first impulse, a simple variation from even to odd, as did the first simpleton; but then a second thought will suggest that this is too simple a variation, and finally he will decide upon putting it even as before. I will therefore guess even;' -- he guesses even, and wins.
"Now this mode of reasoning in the schoolboy, whom his fellows termed `lucky,' -- what, in its last analysis, is it?'
`It is merely,' I said, `an identification of the reasoner's intellect with that of his opponent.'"
Later he found that the mathematics within game theory prevailed. There was no statistically significant difference between how often each player won (SN: 7-08).
Second Example is in the fast-paced story of "The Quants," Wall Street Journal reporter Patterson explores the role of mathematicians behind the financial crash of 2008. The tale follows investors who are called the Quants forasmuch as they use complicated abstract mathematics and computers to gain millions of dollars through the applying the results to the market.
This true-life plot is fascinating and simple to understand, however some financial terminology can be a bit difficult to comprehend, yet the story of applied mathematical high-jinks and excessive prosperity along with the fast rise and upcoming fall is absolutely captivating.
"For the most part I do the thing which my own nature drives me to do" (Albert Einstein).
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