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Yet another article blaming the poor quants. Anyone with nonzero experience in finance knows that quants have no power and earn no respect. Of course quants kno
by KonaB 17y ago
Yet another article blaming the poor quants. Anyone with nonzero experience in finance knows that quants have no power and earn no respect. Of course quants know that models have limitations, but if you tell your boss that one should be conservative, the only thing you will attain is to get yourself fired. The ones to be blamed are the ones with decision-making power, and everybody knows that quants have as much decision-making power as the IT guys.
At least they talk about Aaron Brown. In any case, I was expecting more from the WSJ. They used to be better than this...
- BearOfNH 17y agoIn any case, I was expecting more from the WSJ. Amen to that. The article mentions "The secretive trading operations within banks that use large doses of leverage, or borrowed money, to make huge bets on the market". This is just not true -- and the WSJ should know that. You can generate leverage without borrowing a dime. Options contracts can be highly leveraged yet involve no borrowing. Futures contracts can be highly leveraged with no borrowed money. In both cases the exchanges have put in place elaborate mechanisms to ensure a losing side can pay up, and guarantees the winning side will collect even in case of complete counterparty failure. There is no borrowing here but there's plenty of leverage. Unfortunately a lot of the bad trades behind the meltdown (AIG derivatives, etc.) were basically private contracts, with no exchange mechanisms in place to mitigate counterparty risk. That's also one reason nobody knew what was really going on.