Running Wall Street

The Wall Street Journal (WSJ) ran a piece this week-end titled "The Quants Run Wall Street Now". Some pictures of me are in the WSJ library; they took them at a presentation I gave at The Thalesians last month. They used one of those pictures to illustrate "the quants".

The picture illustrating the article is
Figure 1: Me with the first step of AAD printed on my face and the recursive formula on my shirt.

Following the article, I feel the need to clarify a couple of "details". First of all, I'm not running anything or anybody at Wall Street. You may thing that this is a pity for human society, but personally, I feel very good about it and I don't want to run anything or anybody; nevertheless I don't mind speaking to people who want to listen to me willingly. This is the case for practitioners, regulators, academics, and journalists.

Now about the content of the article. It discusses the increasing importance of "quants" in finance. It is important to clarify that a "quant" can be many things in finance; this is not done in the article and leads to confusion, like illustrating the article with a picture of me. There are several types of quants: big data quants, high frequency quants, derivative quants, risk quants, balance sheet quants (and many others, but I stop there).

The article is more about big-data quants and a little bit about high frequency quants. So the illustration of the article by a derivative - in all sense of derivative, given the algorithm depicted in the picture - quant - me -, may not be the most appropriate. On the other side, I have to confess that using a title containing "Algorithmic Differentiation" in a seminar on derivatives and balance sheet, may have confuse people looking for algorithmic trading.

I described myself above as a derivative quant. I have to add that this has been the case and is still partially the case, but I have slowly transformed into a balance-sheet quant. I'm planning to write more about that in a forthcoming blog - which I have started to write some weeks ago. Derivative pricing is about replication; replication is creating a small balance sheet composed of the option, some cash and some underlying and creating a strategy for it to maturity. The balance-sheet of a bank is simply a grown-up contingent claim. In that sense, evolution from derivative quant to balance-sheet quant is a natural evolution when growing-up.

To my subjective point of view today, I would say "The balance-sheet quants will run Wall Street Tomorrow!" Maybe that will be an article in The Wall Street Journal in a couple of years, and then the picture will be correct.

The slide that you see on the WSJ picture will be Table 2.3 in my forthcoming book Algorithmic Differentiation in Finance Explained. The very last corrections of the proofs are with the editor as I write. I'm still hoping for an availability in libraries before the summer holidays.

Thanks to the WSJ for running such an advertisement campaign for my book.


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