Monday, March 09, 2009

So You Want To Be A Quant

We have all heard about the flood of theorists who left physics and turned to the dark side of the force - going into quantitative finance (quant).

{OK, OK, I was just having fun. Don't send me hate mail about it being the dark side of the force}.

The NY Times has an article on this, detailing the stories behind the physicists who are now getting blamed for the economic collapse.

Quants occupy a revealing niche in modern capitalism. They make a lot of money but not as much as the traders who tease them and treat them like geeks. Until recently they rarely made partner at places like Goldman Sachs. In some quarters they get blamed for the current breakdown — “All I can say is, beware of geeks bearing formulas,” Warren Buffett said on “The Charlie Rose Show” last fall. Even the quants tend to agree that what they do is not quite science.

As Dr. Derman put it in his book “My Life as a Quant: Reflections on Physics and Finance,” “In physics there may one day be a Theory of Everything; in finance and the social sciences, you’re lucky if there is a useable theory of anything.”

It's a fascinating article, and certainly should be read especially for anyone who thinks that this option might be something they might think about if he/she is leaving physics to go into this sector.



Quantum_Flux said...

Hey, if people just played the game by the rules, much like in golf, then everything would go as planned.

Anonymous said...

Well somewhere along the line - and it wasn't the first time and it won't be the last - somebody, a smart ambitious fellow, thought there's more money to be had if he could change the rules.

You know there's probably a place for, a perfectly rational and non-destructive use for those 'innovations' that the physicist invented for the financial market. An analogy maybe nuclear power versus irradiating yourself with nuclear bombs. I suppose they'll need a physicist to explain how to regulate these things.

Quantum_Flux said...

By the way, I think somebody could write an equation for the perfect golf swing too, but I'm not sure that everybody would listen.

Marcus Aurelius said...

The "quants" did not invent a lot of those instruments - they were in place long before quants came to town.