The Quants

How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It

By: Scott Patterson

Narrated by: Mike Chamberlain

In March 2006, the world’s richest men sipped champagne in an opulent New York hotel. They were preparing to compete in a poker tournament with ­million-dollar stakes. At the card table that night was Peter Muller, who managed a fabulously successful hedge fund called PDT. With him was Ken Griffin, who was the tough-as-nails head of Citadel Investment Group. There, too, were Cliff Asness, the sharp-tongued, mercurial founder of the hedge fund AQR Capital Management, and Boaz Weinstein, chess “life master” and king of the credit-default swap.

Muller, Griffin, Asness, and Weinstein were among the best and brightest of a new breed, the quants. Over the past 20 years, this species of math whiz had usurped the testosterone-fueled, kill-or-be-killed risk takers who’d long been the alpha males of the world’s largest casino. The quants believed that a cocktail of differential calculus, quantum physics, and advanced geometry held the key to reaping riches from the financial markets. And they helped create a digitized money-trading machine that could shift ­billions around the globe with the click of a mouse. Few realized that night, though, that in creating this extraordinary system, men like Muller, Griffin, Asness, and Weinstein had sown the seeds for history’s greatest financial disaster.

©2010 Scott Patterson (P)2010 Random House

Critic reviews

"Scott Patterson has the ability to see things you and I don't notice. He does an admirable job of debunking the myths of black box traders and provides a very entertaining narrative in the process." (Nassim Nicholas Taleb, New York Times bestselling author of Fooled By Randomness and The Black Swan)

Very good telling about quants

Really good story telling to understand the history of the quants and the impact they have had

A novel with a market ambiance

This book should be read with proper expectations. It does not provide much in terms of information regarding technical side of events (even if washed down for the casual reader). It's more of a romance with characters, dialogue lines, account of feelings and internal thoughts of characters which, in this case, is set on a "quant finance" environment. I guess in this sense the book is good and nice performance, although not my style.

Very intersting and engaging...

I loved this book. Ends about abruptly, I guess it's fitting considering the crash. Still was a fun ride!

Dence book, not recommended as a casual read

This book is pretty dense. I wouldn't recommend it to a casual reader. I am starting an algorithmic trading fund, so I liked this book because I am trying to get more focused information on the history of algorithmic trading on Wall St and with traditional investment firms.

If you're looking for entertaining stories about wall st and trading, this is not really the book for you.

It's a great backstory that walks you through the original algorithmic traders on wall st and how their quantitative analysis strategies evolved from trying to beat the dealer at blackjack or game the roulette wheel, to running the world's financial markets.

Not so much about high speed trading, this book talks a lot about the theory of using computer algorithms to trade and find an "edge" against human traders.

There's really interesting backstories behind the role that the quants played during "Black Monday" in the 80s, the collapse of LTCM in the late 90s, the 2007/2008 derivatives bubble.

I did not realize that most of the financial voodoo products like CDOs, credit default swaps, options trading, etc were mostly instruments created by quant traders.

Nassim Taleb, the author of The Black Swan makes an appearance a few times in this book.

If you google "wall street trading floor" you will see the pictures of barren wall st trading floors with a tiny fraction of traders compared to what you'll probably remember from the movies. This is thanks to "the quants".

Computer algorithmic trading systems have depreciated the traditional wall st trader.

We are now in an era where Artificial Intelligence is shifting the market once again...who knows how this will work out.

Overall, this was a great book with lots of solid information about the previous generations of hedge funds and trading methods used by the biggest funds in the world.

It gets boring sometimes, it probably could have been about 30% shorter.

risk management the secret of trading

it was a good story, specially now that I'm studying artificial intelligence for trading.
key lessons I rescue form the book:
1) statics that we use for explaining the universe does not apply to price movements (in fact would be an error)
2) risk management (leverage, position sizing) it's still the hollygrail of trading. just like in poker. and from my point of view, the way the small guy can still beat the market.
3) things are only going to accelerate (volatility?)
4) "for a man with a hammer every problem seems like a nail" , Charlie Munger referring to quants that forgot rule 1.

Great book for financial and math types

Thorough and well explained. I really enjoyed the biographical setting of the book and parallel tracking of the characters. If you are interested in the "why" of financial meltdown of 2008 this book goes a long way in answering a good part of it. Couple this with the "The Number That Killed Us" and "The Big Short". And you get the picture. Should be required learning for Congress and SEC.

amazing

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Learnt about Quants I didnt really know

I've heard and read a great deal about Jim Simons and Ed Thorpe, but this book went into great detail on the lives less famous quants - Boaz Weinstein, Peter Mueller and Cliff Asness. It was especially surprising to discover that quants fared really poorly in 2008, one would have imagined they knew it all. The only gripe I had with this book was that it painted the quants as the cause of the 2008 crisis, which I believe is wrong. They were certainly caught in it, but were not the cause.

Too much, too little and just right

The previous reviewer pretty much nailed it on the head for me: the author enjoys writing the about the personal -- and largely irrelevant -- stories of the people profile. Had he just spent as much effort unwinding the how and why of the quants approach, I would have enjoyed this book much more. When he doesn't overthink it, the narrative is focus and informative. When he does, its push the work very close to a fictional feel.

Of course, understanding the level of hubris involved in this culture is part of understanding how and why it lead to the outcomes it did, so it was essential to cover that. Just too much of a good thing here.

One concluding suggestion: if you decide to invest your time and attention into the offering, make sure you have already done the same or will follow this title up with Taleb's "The Black Swan." Its a great counterpoint this.

Great review of financial engineering principles

Author provides detailed illustration of delusions and simplifications of the efficient market theory. He also touches potential future market exploits and vulnerabilities.