The Quants

How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It

Ranked #17 in Hedge Funds, Ranked #55 in Bankingsee more rankings.

“Beware of geeks bearing formulas.”
--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...

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Barry Ritholtz The Quants explains how maths, combined with a lot of leverage and a bit of modelling error led to a lot of disasters. It’s about the mathematicians and, literally, rocket scientists who came up with a series of concepts as to how to use mathematics to try to game the market. The fun thing about mathematics is that you can identify these really small, really tiny edges that you wouldn’t find otherwise. But if you have a 0.015% edge, you can’t really make a lot of money unless you really ramp up the leverage, so most of these guys traded with a lot of leverage. But the laws of mathematics are... (Source)

Ryan Graves Recommends this book

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