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ISayMoo
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Re: Is it over?

November 27th, 2017, 10:44 pm

John Hull is not a quant?
 
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bearish
Posts: 5188
Joined: February 3rd, 2011, 2:19 pm

Re: Is it over?

November 27th, 2017, 11:56 pm

Why do you see CDOs as an exception? Do you honestly think that the pricing of 50-year cancellable IR swaps has more basis in reality than of a 5-year CDO tranche? At least someone, somewhere, held the latter to maturity.
Not the CDO product per se. The basic ideas of reducing risk through diversification and leveraging up or down via tranching are both sound. But the entire machinery developed around base correlation and mapping bespoke portfolios onto index curves and extensions to CDO-squared and even more complex structures did not represent our finest work. Whether bottoms-up or top-down, the models were made to appear like just another set of derivatives pricing tools, yet lacked just about any theoretical basis of the sort that had been developed for equities, rates and FX. Parameter uncertainty, hedging cost, basis risk, and the like are all very real concerns in all derivatives modeling, and usually get worse with long maturity, nonlinear payoff, and multiple underlying assets. But given a choice of marking and risk managing a book of PRDC swaps and one filled with bespoke CDO and CDO^2 tranches I would feel more comfortable with the former.
Quants didn't price CDOs. Banks hired magicians for that task.
Agreed. With "pricing" in this case I really meant providing tools that would be used in the generation of P&L statements and thus, implicitly, bonuses.
 
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bearish
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Re: Is it over?

November 28th, 2017, 12:02 am

John Hull is not a quant?
John is an academic with a flair for exposition and the (co-)author of a remarkable number of papers containing simple derivative valuation models that have found practical use. To the best of my knowledge, he has not spent all that much time in the trenches (not to be confused with tranches).
 
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Gamal
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Joined: February 26th, 2004, 8:41 am

Re: Is it over?

November 28th, 2017, 8:33 am


Agreed. With "pricing" in this case I really meant providing tools that would be used in the generation of P&L statements and thus, implicitly, bonuses.
And that's the problem with the profession - how easy it is to replace quants by magicians. After 20+ years within the banking environment quants are still implants from academia - to be removed as soon it is possible.
 
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ISayMoo
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Re: Is it over?

November 28th, 2017, 9:04 am

I'm confused. Are quants practitioners in the trenches or implants from the academia?

You guys need to find a better cover story for your attempt to distance yourself from this part of quant finance which gained notoriety.
 
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bearish
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Re: Is it over?

November 28th, 2017, 12:12 pm

I'm confused. Are quants practitioners in the trenches or implants from the academia?

You guys need to find a better cover story for your attempt to distance yourself from this part of quant finance which gained notoriety.
Most of us who have been doing this for a long time are arguably both. By convention, full time academics are not usually described as quants, even when otherwise qualified. This is based on a usage of “quant” as an occupation rather than a state of mind or in possession of a set of qualifications.

And I am not particularly trying to distance myself from the credit derivatives history, merely suggesting that it is not something I am all that proud of, either on a personal level or on behalf of the industry.
 
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Gamal
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Re: Is it over?

January 9th, 2018, 9:55 am

I think quantitative finance is not over. Except for one place - Wilmott forum. We don't discuss options anymore, we discuss Donald Trump.
 
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bearish
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Joined: February 3rd, 2011, 2:19 pm

Re: Is it over?

January 9th, 2018, 3:34 pm

I think quantitative finance is not over. Except for one place - Wilmott forum. We don't discuss options anymore, we discuss Donald Trump.
That is sadly true. The discussion part, I mean.
 
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RiskUser
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Joined: July 19th, 2006, 4:30 pm

Re: Is it over?

February 21st, 2018, 11:33 am

To the OP a different perspective.....yes, bilateral margin rules, regulatory capital and a push to clearing will result in a simplification of products across the board.
 
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bearish
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Re: Is it over?

February 21st, 2018, 1:03 pm

To the OP a different perspective.....yes, bilateral margin rules, regulatory capital and a push to clearing will result in a simplification of products across the board.
Didn’t that already happen, like ten years ago? Perhaps it’s another case of the old William Gibson saying: “The future is already here — it's just not very evenly distributed.”
 
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Gamal
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Re: Is it over?

February 21st, 2018, 7:45 pm

To the OP a different perspective.....yes, bilateral margin rules, regulatory capital and a push to clearing will result in a simplification of products across the board.
Were TARNs, range accruals, snowblades and many others with forgotten names intelectually challenging? Shaping payoffs was just boring. The problem is not with products but with us.
 
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Traden4Alpha
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Joined: September 20th, 2002, 8:30 pm

Re: Is it over?

February 21st, 2018, 8:27 pm

To the OP a different perspective.....yes, bilateral margin rules, regulatory capital and a push to clearing will result in a simplification of products across the board.
Were TARNs, range accruals, snowblades and many others with forgotten names intelectually challenging? Shaping payoffs was just boring. The problem is not with products but with us.
Well then what about using QF modeling techniques on human behavior?

What if every financial instrument is really a derivative who's underlying is humanity?
 
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Gamal
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Re: Is it over?

February 22nd, 2018, 9:29 am

To the OP a different perspective.....yes, bilateral margin rules, regulatory capital and a push to clearing will result in a simplification of products across the board.
Were TARNs, range accruals, snowblades and many others with forgotten names intelectually challenging? Shaping payoffs was just boring. The problem is not with products but with us.
Well then what about using QF modeling techniques on human behavior?

What if every financial instrument is really a derivative who's underlying is humanity?
Do we have a BS of human behaviour? A single formula describing rigorously the most important factors of human behaviour? If not it's carving of the air.
 
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Cuchulainn
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Re: Is it over?

February 22nd, 2018, 11:45 am

42
 
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bearish
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Re: Is it over?

February 22nd, 2018, 11:48 am

42
What is six times nine?