Disclaimer: I’m not mentioning the source of quotes in the statements below. The video juggles between different quants, because obviously its a documentary. Not keeping a track of it for now, please watch the video in case the sources interest you here.
Notes from the transcription (includes the quotes):
- one must’ve handful of skills to pay extra bills
- a million dollar check ain’t enough either
- a view drives prediction models, because you’re supplying the input. The term prediction is absurd.
- 1$ – 1 bottle; 100 bottles? non-linearity. market fluidity; consumption/production; maybe 80; maybe 200
- you could always start by finding a job to build infrastructure around models if you don’t primarily fit the personality of a quant and it interests you and you need to continue being a technologist to earn a living while you burn the midnight oil.
- sell software to investment bankers; get customers; build clustering models / correlation signals around insurance policies: whats the highest group average that leaves biggest dent; may determine frauds too
- subprime mortgages -> financial products: attracts banks
- sell big. this covers possible errors: maximize the profit margin
- disasters happen when there’s low profit margin, combined with the quants saying that its alright, and then… . poof!! 
- understand the dangers involved with credit directives [mortgages for example]
- relationship(interactions) between say a 1000 mortgages. how many correlations are there in a 2×2 combinations of these things? Answer: 1000*999/2 -> .5 million numbers. Lets assume all numbers are 0.6.. ridiculous model from sublime mathematical model. mistakes!!
- 4-5 years worth of data is not enough to base a mathematical model upon, as it doesn’t cover the economic cycle of data
- common belief that everything’s gonna go up (by the amt of compensation).. leads to delusional minds: goal of everyone: 40 tak notes chaapo and stop.
- if hedge fund drops (x % they take each year and put in their own a/c) when they loose it, it’s their client’s money.
people who take risks should be compensation, but not for taking risks with other people’s money. ridiculous. not economic
- majority may not always be judicious and conservation while lending (context: mortages). Piles up leading to financial panic.
- have to be wired, alert and engaged; have to be perfect and write all the time. Software CANNOT fail. A Lot of stress. Nightmares.
- purpose of banks is becoming dangerous: new derivatives invented to hedge the value of a product. Banks used to do it. Farmers were busy growing it and not speculating prices. Now, people trade commodities and involved in production of these commodities. People in this business feel jaded now, but questioning ethical values on this kind of job.
- One should spend a lot of time in learning and reading “like a monk in a monastery”. Peaceful and effective indeed.
- Express worries about what one is doing. It’s possible to do it in Finance and people should do it. Increasing financial crisis since 1994. People used to constant growth and acceleration. Every time it slowed down, government stepped in to stimulate growth by lowering interest rates. Given the rise and collapse, oscillations get bigger because of the habit of seeing continuous growth.
- Economy shrinking by 1% is awful. Growing by 1% is fantastic. How can a 2% make a big difference in the world? Economists.. they think that they’re scientists so they come up with these what they call laws. They’re not laws. Gravity is a law. They build up this edifice of theory built upon a shaky foundation and they get all sort of nonsense coming out of it.
- Money is a game that people make rules for. Day-to-day activities though involve trying to grow into a healthy group of animals. Big difference.
- Everything eventually goes back to big bonuses. Know your history. Quants won’t be eliminated. Every model would still be there.
- “I wanted to feel challenged again. Enrolled into a quant program. cost me $60,000 tuition. Means more debt that I now have to take on”. Can’t afford to loose a day to alcohol. No social life. Most candidates here are Asian; which means math is their first language and our common language. We Americans are a minority.
- Everybody wants to move into this field. Scientific creativity is becoming financial creativity. Which is already bogus.
- Quant is essential to modern banking; because so much of it is based upon new techniques like the latest thing is the algorithmic trading and high freq trading, of which you need math skills.
- Used to be historically floor traders and workers, screaming and shouting.
- Understand the consequences of High Frequency Trading. (put data on trays that last for milliseconds)
- Hedge funds try to take the black box as close to an exchange as possible. Takes time for a signal from black box to get to the exchange to buyout or sell. Now of course, that is dictated by speed of light. Now we’re talking about trading at speed of light.
- Classic crash of October’87. Happened within a day. Next one could occur within minutes
- Black Box? takes in lot of data like stock prices, etc and tells what to trade o buy. Favorite is Google search term, trading based on what people are searching for.??
- BB is almost hard to get for human mind. CS guys could wrap their hands around it. Like Goldman Sachs is a BB, or generally spoken of, as one.
- HF trading is concerned with price, not value of something. Value is worth. Price is just what people buy and sell for. All you care for is price you sell it for > buying price. Nobody cares about value.
- #UnitedAirlinesBankrupcy involed algo’s saying SELL SELL SELL. Frightening because human elements being divorced from banking essentials.
- Banking is supposed to be to take money from people with too much -> people with business ideas. Now it’s only about gambling with numbers.
- Jokes about NYSE becoming a museum. “way we used to trade” back in sensible days.
- Quantitative methods do not suffice in general to explain markets. They’re not useless though. Discoveries made by Einstein, Feynman, Schrödinger and such explain God’s truth and based on a field where history repeats itself. In Finance, mostly the history doesn’t repeat itself..
The Financial Modelers’ Manifesto:
- I will remember that I didn’t make the world, and it doesn’t satisfy my equations.
-> Maturity in understanding that in reality, the equation might not always be perfect
- Though I will use models boldly to estimate value, I will not be overly impressed by mathematics.
-> People make finance too mathematical that after implementation, they don’t understand their own models.
- I will never sacrifice reality for elegance without explaining why I have done so.
-> Its a competition b/w real and elegant world of math.
- Nor will I give the people who use my model false comfort about its accuracy. Instead, I will make explicit its assumptions and oversights.
-> Quants are sometimes just told to “measure the risk in this portfolio”. It’s too big. Quants are told to redo the numbers and change the math to make it look less risky and come up with smaller numbers.
- I understand that my work may have enormous effects on society and the economy, many of them beyond my comprehension.
-> This is a serious business. Feels like everyone is working to service the bank. Apparently the world of banking is changed now.
– Paul Wilmott and Emanuel Derman
“The Hippocratic Oath“