My Life as a Quant Read Online Free

mid-1990s geeks were fair game. One afternoon a colleague and I were standing on either side of one of the narrow aisles between the banks of trading desks on the floor when one of the chief traders walked between us, his head momentarily between ours. At that instant he winced, clutched his head with both hands as though in excruciating pain, and exclaimed, “Aaarrggh-hhh! The force field! It’s too intense! Let me out of the way!” In the same vein, I lost count of the number of times some junior traders heading for lunch entered the elevator to see a group of quants standing there and then reflexively uttered some variant of “Uh-oh! Isn’t there some rule against all of you getting in the elevator at once?”
    Traders and quants are genuinely different species. Traders pride themselves on being tough and forthright while quants are more circumspect and reticent. These differences in personality are reflections of deeper cultural preferences. Traders are paid to act. All day long they watch screens, assimilate economic information, page frantically through spreadsheets, run programs written by quants, enter trades, talk to salespeople and brokers, and punch keys. It’s hard to have an extended conversation with a trader during the business day; it takes an hour of standing around to have five minutes of punctuated repartee. Part of what traders do has a video game quality. In consequence, they learn to be opinionated, visceral, fast-thinking, and decisive, though not always right. They thrive on interruption.
    Quants do not. Like academics trained in research, they prefer to do one thing from beginning to end, deeply and well. This is a luxury that is difficult to enjoy in the multitasking world of business, where you have to do many things simultaneously. When I moved to Wall Street, the hardest attitude adjustment for me was to learn to carry out multiple assignments in parallel, to interrupt one urgent and still incomplete task with another more pressing one, to complete that, and then pop the stack.
    Traders and quants think differently, too. Good traders must be perpetually aware of the threat of change and what it will do to the value of their positions. Stock options in particular, because of their intrinsic asymmetry, magnify stock price changes and therefore suffer or benefit dramatically from even small moves. Quants think less about future change and more about current value. According to financial theory, at any instant the so-called fair value of a security is an average over the range of all its possible future values. Fair value and change are therefore two sides of the same coin; the more ways in which a security can lose value from a future market move, the less it should rationally be worth today, and hence the mantra: more risk, more return. This difference between the quant’s view of value as an average versus the trader’s need to worry about any change makes this kind of professional cross-communication difficult.
    Tour de France cyclists don’t need to know how to solve Newton’s Laws in order to bank around a curve. Indeed, thinking too much about physics while cycling may prove a hindrance. Similarly, options traders need not be expert quants; they can leave the details of the recipe for manufacturing options to others as long as they have the patience to thoroughly understand how to use it and when to trust it, for no model is perfect. One trader I know used to say, “You can’t give a person a Black-Scholes calculator and turn him into a trader,” and this is true; it takes study, understanding, intuition, and a grasp of the limits of the model in order to trade wisely. You cannot just follow formulas, no matter how precise they appear to be.
    A good quant must be a mixture, too—part trader, part salesperson, part programmer, and part mathematician. Many quants would like to cross over to become traders, but they face the formidable