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House Price Crash Forum

Quants: The Alchemists Of Wall Street

Harry Sacks

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-Banking Has lost touch with its purpose and has now become dangerous.....there are more people trading,speculation on food/commodities than involved in the production...betting on the future price, moving money around.

-The gamblers can't lose they get a bonus making other people money using their money... they also make a bonus and take a fee from losing other peoples money....the investment banker can therefore never lose.

Two important points made.....nothing has changed....not clever only blinding with science :-(

I think investment banking/hedge funding etc mostly serves the vanity of the middle classes and the rich, as an entertainment service, there really are few good reasons for giving the majority of these clowns your money, except for some kind of diversionary entertainment

however, they have no greater right than any other overpaid entertainers (say, footballers) to taxpayers' cash and to imperil the broader economy

Edited by Si1
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Perhaps... Non-linearity is very important - it's a big part of what makes Black Scholes bogus... The algorithm assumes that the rate of change of rate of change is constant... while it often appears to be the case, this is just an artefact of our attempt to measure it. In reality, a price only exists the instant at which a trade is made - and the price only applies to the traded units. The upshot of this is that, pretty much, all linear algebra models for prices are bogus - because prices simply aren't continuous. Initially, the model is 'forced' to fit the available facts - then... if it continues to hold as the future unfurls, it does so only because people defer to the model over other opinion, and it becomes a self-fulfilling prophecy. It's as true as predictions from astrology... and for the same reasons.

I thought it particularly interesting as it was a claim that they'd proved that something only ever goes up (all be it at a rate that might involve complicated calculation.)

agreed. to make money though your model only needs to be better than the market. it doesnt have to be correct.

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CQF is not required. Generally to become a quant, you need a Phd in something quantitative like maths or physics. A cqf gives a good overview of the general tools and theories in the market, but doesnt go into anything in detail, or any really challenging maths. It is £13000 just for some books and online lectures. Anyone of the right calibre to get the job would be able to learn the same material via self study for a fraction of the time and cost.

Mr Wilmott is the founder of the cqf, so he is very biased in its favour given his VI.

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