The LTCM Crisis taught #Quants one thing in common.
Never trust the risk pricing/hedging models blindly.
The Black Scholes option model assumptions and the Value at Risk Metric both failed miserably.
The liquidity assumptions of the #VaR Model provided a false sense of security.
Never trust the risk pricing/hedging models blindly.
The Black Scholes option model assumptions and the Value at Risk Metric both failed miserably.
The liquidity assumptions of the #VaR Model provided a false sense of security.
The most worrying thing is that if #LTCM which was a hedge fund managed by two @NobelPrize winners in Economics could not get things right, then what should one expect from humble risk practitioners like myself!?
imagine the amount of risk that is concealed by Black Box Models.
imagine the amount of risk that is concealed by Black Box Models.
Always backtest and stress test your #risk models.
Not just the mathematical components, but also the semantics, the #hermeneutics, the syntax that is used for coding the automata, and the symbols which are shown on the analytical dashboard.
It is a big #CON industry at work!
Not just the mathematical components, but also the semantics, the #hermeneutics, the syntax that is used for coding the automata, and the symbols which are shown on the analytical dashboard.
It is a big #CON industry at work!
of course, if a #Quant brings a model to your desk to impress you with all the domineering appearance of differential equations, #discretization, simulation, and stochastic process numerical solution complex imprints.
JUST ASK ONE QS PLZ
Are you shorting or long on #volatility?
JUST ASK ONE QS PLZ
Are you shorting or long on #volatility?
Most of the Quants don't know study psychology.
A financial market trader or derivatives modeller must not ignore two human behavioural traits that affect
financial markets->
1. #GREED
2. #FEAR
Greed > Fear => Go Long
Fear> Greed => Sell Short
A financial market trader or derivatives modeller must not ignore two human behavioural traits that affect
financial markets->
1. #GREED
2. #FEAR
Greed > Fear => Go Long
Fear> Greed => Sell Short
Remember working with a long convexity adjustment - exploiter arbitrage "no-nonsense" modeller, who made us lose so much money at a boutique financial firm.
Poor Chap didn't know how to price equity derivatives using ex-dividend dates.
All Greek hedging became so costly
Poor Chap didn't know how to price equity derivatives using ex-dividend dates.
All Greek hedging became so costly
And yes, I have seen some applying Maxwell Heat Equations Theory to Option pricing.
PDE Partial Differential Equation with moving boundaries models have many applications outside STEM,etc
Now, Barrier Options in Financial Engineering Areas, are priced using such models.
Good Luck
PDE Partial Differential Equation with moving boundaries models have many applications outside STEM,etc
Now, Barrier Options in Financial Engineering Areas, are priced using such models.
Good Luck
I want to END this thread by admonishing most of the top-notch quants, financial engineers, complexity science modellers, and econometricians are faced with the one and the same quagmire.
They are reporting to Accountants who have taken seats inside bank boardrooms
Enough said?
They are reporting to Accountants who have taken seats inside bank boardrooms
Enough said?
Good Luck and may you have the Risk Model of your choice!!
"Hasta la vista, baby,"
"Hasta la vista, baby,"
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