96 of 106 people found the following review helpful:
5.0 out of 5 stars
The Human Side of Quantitative Finance -- Great Read!, September 27, 2004
The book commences with a history of physics that is reminiscent of "The Elegant Universe" by Brian Greene. From Newton to Maxwell to Einstein and beyond, Derman discovers the great theories of yesterday and finds himself in the middle of a seven year marathon to a PhD and the launch of his academic career.
The struggle for intellectual purity and the distain for applied work abound in Derman's academic environment and the pressures of achieving greatness are pronounced in a place where genius is a commodity.
In a leap of faith, Derman decides to return to New York to spend more time with his family and to surrender to what he considered a less dignified job.
Lost in the Dilbert-esque hierarchies of the Bell Labs, Derman discovers the joy of programming, while submerged in office politics. After numerous attempts of beating the currents, Derman finally reaches the shores of Wall Street and is relieved to find an avant-garde environment, where meritocracy is no longer a foreign word.
The initial period of awakening takes place at Goldman Sachs, where he is mentored by Fischer Black, one of the great financial practitioners of our time. Derman is immediately impressed by Black's pragmatic style and intuitive quest for simplicity.
Black's influence becomes evident in the lucid and accessible description of the famous Black-Derman-Toy interest rate model and the subsequent elaborations on local volatility models that are at the foundation of more exotic instruments (which cannot be accurately priced using the overly simplistic implied volatility provided by the Black-Scholes-Merton model).
The author discusses the process of deriving original models and emphasizes that the elegant stochastic calculus derivations of these models are deceptively simple and make it difficult for students to fully appreciate the amount of effort that went into developing the initial embodiments -- what seems obvious now was once heavily debated.
Armed with the recently acquired knowledge, Derman accepts a new challenge at Salomon Brothers, doubling his compensation in the process. Unfortunately, the unhealthy competitiveness at Salomon forces him to reconsider quickly and he returns to Goldman after an undeserved layoff. The roundtrip allows Derman to develop an appreciation for the collaborative environment at Goldman.
Throughout the book, the interactions with family members, professors, bosses, traders, programmers and sales people are both amusing and enlightening. Derman succeeds in blending physics, finance, and human emotion in this masterful and entertaining autobiography.
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35 of 37 people found the following review helpful:
3.0 out of 5 stars
Not really what I expected..., October 12, 2005
It was an interesting read but not what I expected.
It is my own fault. I bought it because the title (Physics and Finance) caught my eye and the average rating and number of reviews was high. I would guess it is not a heavily embellished memoir. Emanuel appears to be an honest, practical and educated individual. I found myself in the beginning wondering when I would start to read something about his life as a Quant. I don't know the exact page but I was probably half way through the book before I got my first taste.
In the end I found it like most things I have not personally experienced, it is more romantic to dream than live. This is not to say he didn't do good things. It just means for every minute of success and enjoyment there are hundreds if not thousands of minutes of grind and perseverance. The grind is not always so well documented.
Due to my age, I did find myself identifying with Emanuel as he changed from a wide eyed youth ready to change the world to a more pragmatic successful adult. I still envy the enthusiasm lack of experience provides younger people.
I wouldn't recommend it to someone looking for insights in to physics or finance. I would recommend it to someone is in the field or aspires to be in the field.
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21 of 21 people found the following review helpful:
5.0 out of 5 stars
An interesting career path, December 10, 2006
This book is not for those interested in learning quantitative finance. Rather, it is a memoir written by a physicist who came to finance relatively late in life.
There is some poignancy in Derman's transformation from theoretical physicist bent on a life in academia (where he hoped to make groundbreaking discoveries about elementary particles) to mid-level employee of one of the world's great financial institutions (Goldman Sachs). Although he was undoubtedly well paid for the skills he brought to the financial markets, Derman's story is tinged with sadness about the loss of an ideal.
The book is particularly valuable for the insights it provides about the inner workings of a major investment bank, and in particular about the role played by the "quants" in the development of new products and trading strategies. It also provides some perspective on the development of quantitative finance as a practical discipline; and it makes clear that quantitative skills, while important to a successful career in a major financial institution, generally take a back seat to salesmanship, practical trading skills, and internal politicking.
Those with a liking for pure mathematics will have to grin and bear Derman's critical comments about mathematical rigor and economic theory.
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