Why hedge funds investment banks prop shops want physics to apply math principles to their quant algo research trading?
As I learn through Khan Acadeym for things like work, acceleration, particle movement, I thought this was very similar characteristics of quant research. Personally I do see a relationship but others including London Quant don’t quite agree. I want to see your opinion. so comment below.
LQ says they physcists are wanted to because they know how to build models and see through their faults as well. I find this concept interesting but everyone seems to disagree there is no relationship. What do you think? Join my FREE newsletter to see what others think
There are two camps.
The Dermans and the Sorrettes
The Dermans think that the model will break down due to the human behavior feedback loop.
The Sorrettes think that the model will approximate overall phase shifting dynamics.
I think that both are right. That is why I believe that chaos theory and tangential themes are closer to modeling the market.
In terms of physics models, there is power in analogies and a weakness too when applied to finance. But techniques in physics for understand complex systems, like quantum levels, are useful in phase transitions in complex dynamic systems - aka the market.
Paul Cottrell, MBA, ABD
This links may be useful for some of my learning
I really wish math gurus could speak plain English instead of this useless mumbo jumbo
SEC orders Hedge Funds and Private Equity to open their books. Prop shops last bastion of hope for quants?
he Securities and Exchange Commission voted 4-1 Friday to subject many hedge funds and private-equity funds to new scrutiny, including surprise inspections. Hedge-fund managers with assets over $100 million would be required to register with the agency under this proposal.
The new rule, which is expected to be finalized before July 2011, is authorized under the recent Dodd-Frank financial reform legislation. “The enhanced information,” SEC Chairwoman Mary Schapiro said, “will better enable regulators and the investing public to assess the risk profile of an investment adviser and its funds.”
Lisa Swan, a former senior new media editor at the New York Daily News, is a columnist for The Faster Times and a blogger for Subway Squawkers. Her work has also appeared in Yahoo Sports, Huffington Post, Heater Magazine, and the upcoming book Graphical Player 2011.
Why small proprietary shops (prop shops) are better fit for a wanna be quant analysts and quant developer like me?
Screw them large investment banks for now. Here in Toronto, the local Canadian banks pay very very low. As larger banks like Merrill Lynch and Citi start to build their hubs locally here, I am starting to realize I might be better off in a small proprietary shop (also known as prop shows). You learn more and pay better.
We have a few ones which seem to be larger like Algorithmics or Waterfront International, but you might as well have a PHD or other advanced degree like a Masters in Finance. I only have my Bachelors of Commerce which means I am not going very far as compared to the recent youngsters with a Masters.
I started to realize as their might be an opportunity I can be part of. It is a small prop which seems to be virtually an unknown local company. That is fine by me and I am sure fine with the founders of this company. As they have no external clients to impress, they only have themselves, other internal traders to satisfy.
From my understanding, this same company depends one on strategy they have developed. As they have six traders, and two info technology, they seem to be doing well. They can be self sufficient as well as pay quite well. I mean for a local unknown prop shop, they are the highest paying as compared to local Canadian bank. When you think about it, that is a very sad statement for the local Canadian bank scene. Not only is poor paying, but they are highly conservative where you will not learn a whole lot working for them.
As a result, when this small prop shop came around, I started thinking this is where I belong. All their systems are internally house built in C# and C++. They are definite Microsoft .NET shop which I am very fine with. Also, they have built all their servers, protocols, and trading systems by one person. It is one hundred build from their own source meaning that you WILL learn a lot of more and faster as compare to some conservative bank. This is why I feel more comfortable in a small prop shop like this. I hope this can work out for me.