UnRisk Omega

Anti Capitalism, a useful optimisation

Yesterday I met some of the many staff departing ABN Amro, and as I passed what is now an building with "RBS" tacked on as many surfaces as possible I noticed the smell of anti capitalist protesters. It is said that the quality of a man may be measured by his enemies, and thus I felt quite offended that such wretched creatures are apparently my enemies.

I suppose they were protesting about something, but all they had was a dirty flag, with some dippy logo on it. They made no effort to explain their silly ideas, and merely took pictures of themselves, presumably to put on some homoeopathic equivalent of Facebook.

They were apparently not well informed enough to know that given the merger on top of the credit crunch, RBS/ABN is a far more eloquent attack on the failures of capitalism then they could ever dream up.

Unusually for anti-capitalists, one was not pale skinned. Typically they have a higher ratio of white people than a gang of neo fascists or the Labour cabinet. But he had a very cool camera, so I suppose they had to let him tag along.

Given that many of us have more leisure time than we had planned, I wonder if a sabbatical amongst these intellectually challenged individuals might be socially useful. None of us believe that market capitalism is the only or best way of ordering a society, perhaps we should run seminars to explain to these wretches how things work.

Also the quality of protest is wholly pitiful. The bankers passing them did not even pay as much attention as they would to a beggar or an inferior grade of busker. Perhaps we should help them ?

Gaucho, restaurants to be avoided.

As you may have noticed I have been a frequent customer of the Gaucho chain for some years. Quite a few of you have discussed future opportunities there.
As a headhunter in financial markets, it has been a rewarding location for me. Given the current warm weather in London I took the idea of having ice cream in Broadgate restaurant with some clients.
I felt this would be an informal way to keep contacts warm during a slow period. I booked a table for 4:30, and was informed that the restaurant closes at 5:00
I had assured the person taking my booking that as we were only having ice cream, we'd be out for 5. My notion was to try this as a regular thing during the summer. A pleasant outdoor location with ice cream and maybe wine would make a convenient locus to discuss business. Sadly I made a major error in assuming that just because I booked at table with Gaucho, that this would be honoured.
My clients and I turned up, to find some member of their staff telling me that she was "going to call me". This was ambitious given that we'd turned up at the due time of 4:30, and she had not bothered to make that call, even though by now it was the time of the booking. We were told that even though I'd booked, and ensured that we would be gone by 5:00, we could not have the table we had booked. To put it mildly, my clients were not impressed.
This is the last interaction between Gaucho and P&D. I will now take my business elsewhere.
I counsel you to avoid a restaurant chain that does not bother to honour bookings, and seems to think that saying they "will ring you" after you have actually turned up only to be turned away is an acceptable business practice.

Global Derivatives and Risk Management Paris

The only civilised way of getting to Paris from London is by train, unless you want your luggage stolen by the malicious morons at British Airways. That gave time for me to have breakfast with Dan Stefanica of Baruch, for breakfast. A growing issue in MFE programs is quality control, not only of the content but of the students. As in my review of his book, the cost and commitment required for a MFE program does not always mean that the “right” people are takes these courses. Dan is pretty hard line in only letting in those who he figures will actually make it out the other side. That’s not uniformly true, I hear tales of MFEs where 1/3 of the students drop out (after they’ve paid of course)

Refunds ? no.

On the evening before the main conference a a random subset of us met up for a pre conference glass and meal. The excuse being that we wanted to chat about how MFE programs should be evolving in the new market reality. This started off at the Eiffel Tower, as we (Aaron Brown, Bruno Dupire, Peter Carr, Jim Gatheral, were both educated and entertained by Bloomberg where we mixed cocktails with talks on volatility trading. Mostly. The talks were in French, which added to the learning experience in a new and interesting way.We then departed for Devez, a decent restaurant, where Paul Barden and Peter Jaeckel joined us, and just as my day started, we drifted into the difference between what sort of people are attracted into MFE programs, and the ones that do it. The variance is really large, as evidenced by the drop out rate at some places (though not on Peter Carr’s Courant program either). One idea that emerged was some sort of filter based upon what banks want to hire. Although that obviously includes maths ability, it helps if you can actually apply that; which requires real human beings to evaluate. The nature of MFEs is that >80% of students are not doing it for pure intellectual curiosity or a desire to make the world a better place, but to improve their career options. There is also some vague support for a common entrance exam not unlike that used for people applying to MFE programs. A hard problem that needs to be overcome is that now the labour market for quants is very international, it’s simply not possible to do a fair or accurate assessment of a student based upon your knowledge of where they studied. The number of universities in the world defeats that idea completely.

Women in Finance

At the IAFE careers even at Cass tonight at least one reason for the low frequency of women in quant finance became clear to me.
At the event about 1/6 or 1/7 of the students were female, implying that the number of females with quant jobs should be increasing.
In the reception afterwards, almost all the women had disappeared. One of the few women sat huddled in the corner looking at her watch.
Networking is part of building any sort of career, except maybe parking attendant, where you get to walk the loney streets of Gotham alone.
I know there's all sorts of crap put in the way of women, but this particularly large and smelly crap is put there by themselves.

Fordham University MS in Quantitaitve Finance MSQF

We are hearing really bad things about their MSQF, particularly in the matter of being promised internships at the most impressive banks, but not getting them. Internships are of course very valuable, enough that it quite swamps the cost of the Fordham MFE, (38K +$1.5K).
We hear that Fordham is blaming current market conditions, which in its own way is even more damning, since this sort of thing should have been sorted out a long time ago, rather than naively relying upon late applications.
Competition for internships is intense, even in the best of markets, and only someone with no idea about how finance works would think that an unknown programme from a midscale university would command the attention of banks who get many applications for each position.
The fact that Fordham apparently doesn't even bother trying to teach C++ doesn't help, does it ? Of course, they may not have been naive, they may simply have not cared once they got the money.
This may be something of a first for me...
As a headhunter I get lots of people telling me about their MFE, MSQF, MSc, etc. and some of it is not great.
But before I encountered Fordham's MSQF, I avoided using my position to denounce an MFE as a waste of money and time.
This I feel must change.
If you are at Fordham, please feel free to contact me Dominic@PaulDominic.com, so that I can finally decide.

It also apparently doesn't even try to teaz

Kerviel Losses Erase Promotion Chances for Clerks

...according to Bloomberg I note with some amusement that Bloomberg didn’t contact P&D about this, perhaps we aren’t high profile enough ?
It's plausible that SG as a knee jerk reaction stops this sort of move, others may copy but realisitically given the current market it will make relatively little difference. In my Register Article I explained how people can over time acquire more access than is good for the firm, but that is a process issue, and frankly one that is not hard to fix.
M.Kerviel's understanding of systems and processes meant he could do serious harm, but the flipside is that people like him do so much good. This is because very few, if any banks work the way it says on the Visio diagrams put up by business analysts.
Lots of quick fixes, chasing up, and adjustments need to be made, and people like M. Kerviel have a critical role in getting things done. Probably the #1 reason that good experienced hires give to me for wanting to move is that they feel the processes and systems in their firm are getting in the way.
If SG et al stick to this policy, then these valuable people will start to walk, and in the meantime they will make less money for the firm and themselves. Also they will use the full political power they have to try and get “exceptions” made, and/or kill the policy.
Of the workers in this forum I guess 40-50% are mid/back office, risk, or IT. I’d bet 80% were told when they started that if they worked hard and well, there was a job in front office or trading there. So what do you do if work hard, work well, and work to the position you should get, but they “policy” says you can’t. You send your CV to me, that’s what. (Dominic@PaulDominic.com) Or they a send it somewhere else, but we all know that when you see the plateau for your career, that’s when you start looking at the job ads.
Word will get around and people will be reluctant to join firms that act this way, who will of course by this time be making less money.
The article implies that money for Mid/Back office will go up because of this. Being one of the hated anglo-saxon banking types, that makes sense to me. But look at the trade they are making. The chance of getting to the front office costs nothing, but has serious value to staff. Also these are not the best market conditions to increase costs, especially if the goal is in effect to make the trading operation less efficient.
Just because such a policy in harmful if carried out for any length of time, doesn’t mean that it won’t happen in some places, and persist long enough to do real damage.

A pimps eye view of the Kerviel case


Since I wrote this a few more facts have emerged, and I have had an entertaining conversation with the British regulator, the FSA... Spreadsheets were only one tool he used of course, but from when I had a real job, it's pretty clear that unmanaged spreadsheets will figure in the next screwup.

Not even remotely related to quant careers

But deeply cool anyway. A real Working X Wing Fighter made cute

Data Analysis for Quant Finance

Lately we have seen a spate of good jobs looking for people who "understand" data. This does not have a formal specification, but seems important to several banks and hedge funds. They see people with skills in econometrics and signal processing, and that's fine, and can be searched for on CVs and recruitment databases. But it's not exactly what they are looking for, and it seems to be the sort "I know it when I see it" skill that exists merely to make the lives of headhunters like myself difficult. We (they) need people who can look at data series and intuitively grasp that there is a process there, or indeed that what they are seeing is pure noise, or caused by some defect in acquiring the data. Live tick prices are notorious for having bad and broken data points. There are many people who can apply various forms of regression and this is useful skill, but someone has to have this intuition as their lead skill, backed up by various bits of maths.
One idea we've been pursuing are fields like high energy physics where colossal streams of data are emitted, and require interpretation. Could just as well be market microstructure where you've studied price streams with a view to try and work out what people are doing, not just validating a theoretical model.
And yes, it needs to be that way round.
This sort of role demands that in your head, there is a good variety of "mechanical" or physical models for what is going on, and you have a vocabulary that allows you to choose between different classes of process. This is quite a distinct action from validating your finance or physical model against experimental data.
Presumably you have some software skills like Matlab, R, C++, SAS etc, like any functioning quant, but it is critical that you are not so dependant upon the rich functionality that large packages deliver that you let them do your thinking for you.
The firms concerned do not require formal qualifications in quant finance, indeed their expectation is often that the idea people for the role are working in a quite distinct field.
This is not a standard job spec, but the roles are in NY, Chicago and London, perhaps giving you an idea of the demand for this talent.
If this sounds like you, then contact me Dominic@Pauldominic.com and we can informally discuss the way forward.

Too much coffee.

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