What Your CFO Should Be Reading
Guest Blogger: Don Sears
Here's a must read article for your CFO.
It profiles the scientists or 'quants' who apllied theories and models from physics to the stock market. The article presents a multi-faceted look at the problems and benefits of using a more scientific approach to the market, and pokes a lot of large holes in the practice, mostly from quants themselves.
What I like about this one is that it includes Wall Street's issues with profiles of some of the leading voices of applied science in trading.
This flood seems to be continuing, unabated by the ongoing economic collapse in this country and abroad. Last fall students filled a giant classroom at M.I.T. to overflowing for an evening workshop called "So You Want to Be a Quant." Some quants analyze the stock market. Others churn out the computer models that analyze otherwise unmeasurable risks and profits of arcane deals, or run their own hedge funds and sift through vast universes of data for the slight disparities that can give them an edge.
Still others have opened an academic front, using complexity theory or artificial intelligence to better understand the behavior of humans in markets. In December the physics Web site arXiv.org, where physicists post their papers, added a section for papers on finance. Submissions on subjects like "the superstatistics of labor productivity" and "stochastic volatility models" have been streaming in.When the market cringes and contracts, applied science is not in line with craps-table confidence about stock price. It's hard to say it's a good thing that interest in quants is so high at MIT, but not hard to believe.
Perhaps your CFO can steer some of these guys into business intelligence jobs for IT and the organization rather than for making cash.
What do you think will be the reaction from your CFO over this article?