While in Greenwich Ct. one afternoon I will never forget a conversation I had with a leading quantitative portfolio manager. He said to me that despite its obvious attributes “Black Box” trading was very tricky. The algorithms may work for a while [even a very long while] and then, inexplicably, they’ll just completely “BLOW-UP”. To him the most important component to quantitative trading was not the creation of a good model. To him, amazingly, that was a challenge but not especially difficult. The real challenge, for him, was to “sniff out” the degrading model prior to its inevitable “BLOW-UP”. And I quote his humble, resolute observation “because, you know, eventually they ALL blow-up“…as most did in August 2007.
Category: Economics
Psyching Out Borrowers
Follow-up on yesterday’s article about personality tests approval to get loans. Payoff adds a touch of algorithms on top of psychology to determine the creditworthness of the borrower.
Galen helped develop the matching algorithms at eHarmony, which are responsible for 4 percent of U.S. marriages. We’re using his expertise to bring psychology to finance. Our science is ultimately about behavior change and helping people make better financial decisions. This process of change begins with self-understanding, and we’re using advanced psychometric assessments to understand people’s mindsets— the goal being to improve how they approach their financial decisions. We’ve taken the hundreds of questions you might answer in a typical psychometric assessment and compressed them into a three-minute “gamified” online assessment that gauges your financial personality.
Why Personality Tests For Bank Loans Are A Bad Idea
It’s much more likely that, if people want a loan, they will try and game the system. There is a strong chance they would give the answers that they think reflect a better credit trustworthiness: “I definitely pay attention to financial details. I am perhaps, if anything, too cautious.” As opposed to: “Oh, I don’t care, just give me the cash.” Any psychological assessment scheme would have to be robust to such game-playing, perhaps by asking more opaque questions.
Goldman vs. Bloomberg
Will Goldman ever turns Bloomberg into Blackberry ? Ain’t a sure thing.
It’s something like the social register for the global one percent, mixed with the Gutenberg press and a little bit of the iPhone. Getting even more reductive, it’s the ball in tennis: it’s hard to imagine the financial industry without it. As such, many banks and hedge funds gladly shell out the $21,000 or so per unit. Some trading floors, in fact, resemble primal villages in which the biggest bosses can be identified as the guys with the most terminal screens mounted on their desk. Bloomberg L.P. throws off around $9 billion in revenue, making it about as valuable as the N.F.L.
Rain Man In Trouble
The Unraveling of Tom Hayes, Pt. One :
Ms. Tighe printed out the settlement documents and went through them with a yellow highlighter, with Joshua balanced on her lap. She was relieved. They made it clear that Libor manipulation was widespread. Her husband wasn’t even named.
That evening, as she prepared a joint of roasted lamb for dinner, Mr. Hayes sat nearby, puttering on his Apple laptop. A news alert popped up. Mr. Hayes clicked the link. A video of the U.S. attorney general at a news conference in Washington started playing.
“Sarah, I’ve been charged by the U.S.,” Mr. Hayes announced.
Credit : Peter Mlekuz, Janko Klavora
