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The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It Paperback – January 25, 2011
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Top Customer Reviews
If Scott Patterson edited The Joy of Cooking, his recipe for chocolate cake would read as follows:
"Irma Rombauer shuffled nervously. A little flour, a few eggs, and - wham, bam - through the magic of French chef-ery, a cake would magically appear. It had always worked in the past. Surely it would again this time, wouldn't it? Rombauer stared pensively at the oven."
Entertaining, but hardly enlightening, and not useful.
It had a few good qualities, which I'll start with. It was pretty entertaining, especially the first half, and it was a quick and easy read. It also had some interesting bits that don't appear in other books (that I'm aware of): the "second forty hours" at Renaissance and the description of AQR deciding to go back into the markets on the Friday just after the quant liquidation in August 2007. Finally, I applaud the message that risk management policies based on the normal distribution can be deeply pernicious. But the problems with this book were monumental.
The first problem with Patterson's book is that it's wrong at its core. Quant traders weren't guilty of causing the credit crisis. Some of them were victimized by it (when Lehman went bust, it took with it a bunch of money belonging to some very good, honest, and hardworking quant traders that were Lehman's prime brokerage clients). It's foolish to claim that market neutral trading, CTAs, and high frequency traders were somehow responsible for investment banks' over-leveraged, toxic balance sheets. The responsibility for this falls squarely on the shoulders of banks' managers, and perhaps also on the shoulders of free-market disciples who believe, despite all the evidence throughout history to the contrary, that regulation of human behavior is bad.Read more ›
This book neatly retraces the influences of several quantitative traders ("quants", got it?). The author provides a history spanning the early work of Ed Thorp ("The Godfather") up to the current generation of quants who currently run the high-frequency trading strategies on Wall Street.
All in all, the book is a good read... but it also could have been assembled in a more informative way. The author set out a rather difficult task for himself: on the one hand, he has to tell the anecdotes in a way that will reach a wide audience; on the other hand, he has to provide a thorough enough treatment of topics that could easily be found in an advanced textbook. Patterson's approach goes right down the middle, so that sometimes it is condescendingly basic, while at other times unintelligibly riddled with market lingo. Hence most readers will not be able to read it at a consistent pace.
I suspect that the main frustration for most readers will be that extremely important bits are incompletely explained at the outset. For example, the distribution curve on page 30 has no axis labels... either you know what the author is talking about or you don't. Various terminology is not explained well at all; for example, the author's description of warrants will likely send you straight to wikipedia for clarification:
""Warrants are basically long term contracts, much like a call option, that investors can convert into common stock."
Basically? Call option? Common stock?! How about a more through lexicon at the back of the book for everyone who isn't a daytrader?!Read more ›
Most Recent Customer Reviews
I have worked in the industry for more than 20 years so many of the names are familiar. Learning exactly what they did and where they fell into place in regards tithe financial... Read morePublished 6 days ago by Nathan S. Kerr
Great story, very informative, though some of the writing was a little awkward. Also, the chronology wasn't always easy to follow. But in all, a thoroughly entertaining book.Published 17 days ago by Brad Newton
He’s a little too obsessed with how people with power and money can act obnoxiously. Too little information on the technical side of what happened, or digging deeper into the... Read morePublished 27 days ago by Artie
Patterson tells a great story. High level explanation of how quant world works while walking you through history. Keeps your eyes on page the whole time. Well done.Published 1 month ago by T McDonagh
It is probably my fault - I did not notice that this book was a small print, thin pages, soft cover version. Read morePublished 2 months ago by Sam S
I expected some histric analysis but, it is fiction or novel.
Title is misleading and not what I expected.
Overall, thoughtful commentary and illustration on the development of quantitative analytics in the financial industry and its part in the credit crisis.Published 3 months ago by Mark Fernandez
Provides an insightful look at how the major financial houses harnessed the talents of genius-level math and physics scientists to create the computational systems that analyse and... Read morePublished 4 months ago by Robert J. Martin