Quote:
Originally Posted by zeyneddine
Getting into any front office position requires extensive knowledge of math, yes, but as i said, math is hardly the essential tool in trading.
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All of the examples that I gave were of financial professionals and institutions using mathematics to protects themselves from risk and secure greater returns. There is no known instance where an institutional investors applied known and proven advanced calculations to all the variables in the equation and suffered inordinate losses.
My point is, don't try to belittle math or downplay its role because
it clearly pays. The folks at Renaissance are Masters and PhDs in that field and they know what the hell they're doing, which is why Renaissance is one of the top-performing funds on Wall Street, and that's why Simons has such a huge take-home pay. Hedge funds are distinctly different from investment banks, so comparing the two is like comparing apples and oranges.
BearStearns fell because they were too heavily reliant on a particular type of financial vehicle. That had
nothing to do with math and had
everything to do with poor risk management. All of the sub-prime losses suffered at other financial institutions are
commensurate with their portfolio's percentage mix of CDOs. You'll notice for example that JPMorgan didn't suffer as much as BearStearns because they didn't rely so heavily on that vehicle.
I had a lot of direct albeit cursory dealings with BearStearns when I handled their telecom infrastructure account while they were buying out Canadian firms such as Crane Capital and others a few years back. I sensed a distinct change in tone of the BearStearns execs that I used to work with back in spring and summer of 2007 but to be honest, personally I had no clue it was because of the incoming crash.
When it comes to stock trading, I don't bother with it
at all because the returns are so low and the risk is so high, and its not the method that the majority of successful businesspeople in the finance and trade world make their money anyways.