SERVING THE QUANTITATIVE FINANCE COMMUNITY

 
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KackToodles
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psychic investors

June 25th, 2010, 5:01 am

QuoteOriginally posted by: frenchXBut you know modelling occurs now everywhere (physics,econmoy, biology, even social science and psychology). Most of these models are statistical (eg, regressions) -- they are not true theoretical models. A real model starts with a rule (like F=MA). F=MA is very different from somebody in biology or sociology running some regressions and calling these regressions "models". They are not models -- they are really curve fits, no better than astrologers charting stocks.Quote Physic is the science to use the tool of math to try to explain the natural events which surrounds us. the question is: is "quant" a science in the same way? Not!
 
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frenchX
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June 27th, 2010, 7:53 pm

QuoteOriginally posted by: KackToodles the question is: is "quant" a science in the same way? Not! I think that even the quantitative finance rely on model assumption, the non arbitrage principle to name one. After that obviously each science is a mix of "true" model and "fit". It is quite rare that you have the theory before the experiment, especially in physic. For example relativity was developped to explain the invariance of the speed of light measure by Michelson, quantum mechanics (the successor of the Bohr model of the atom) was developped at the origin to explain the emission lines in the spectrum of some excited gases. Einstein invented the concept of photon to explain the black body thermal radiation and the concept of phonons to explain the heat capacity of cristal solids. The famous Newton law for gravity was discovered by fitting the trajectory of the planets. There are very few postulates in physic such as the invariance, the reproductibility and so on.Most of quant I know say "You have luck, you bloody physicist because you can reproduce your experiment, we CAN'T reproduce the market !". this point is false because it is barely impossible to reproduce all the initial conditions of a system and there is even worse for people like me who study rare events. For example a lightning or a supernova explosion ? How do you want to reproduce that !The main difference for me between physics and quantitative finance is that in your world, the "reality" reacts to the model. I mean that if you developp a new model which makes a revolution in the world of traders, all of them will use it and so finally the market will evolve since all the orders would follow your model which was not the case before you developped it .
 
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KackToodles
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psychic investors

June 29th, 2010, 7:13 am

QuoteOriginally posted by: frenchXI mean that if you developp a new model which makes a revolution in the world of traders, all of them will use it and so finally the market will evolve since all the orders would follow your model which was not the case before you developped it . this is only half the point. the other half is that the "models" in quant finance have lots of non-fundamental parameters, which make the model's predictive power very week EVEN IF the model is true. For instance, take the black?scholes options pricing model. You have the "smile" diagram because volatility is hard to forecast. As a result, any two people using the model can price options using a different value for the volatility parameter and come up with a different result.
 
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croot
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June 8th, 2012, 3:39 pm

It seems there has been some progress on the matter of psychic methods for decision-making:how much would your fund pay for THESE services?
 
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Traden4Alpha
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June 8th, 2012, 4:17 pm

QuoteOriginally posted by: crootIt seems there has been some progress on the matter of psychic methods for decision-making:how much would your fund pay for THESE services?A cheaper alternative -- and one that doesn't generate so much poop -- is the Psychic Metal Disc.Now that's change you can count on!
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