Jan 25 2010

The New Rules for Wall Street, explained..

Category: Financeadmin @ 12:04 am

Here’s how it pans out.

Your horse has bolted, so you get up from your bed, frag the steward who told you it’s run off, throw all the other stewards into jail, slaughter your neighbor’s horses, declare that horses are henceforth deemed illegal and no family in the local community can own one, draw up a posse of armed vigilantes that will shoot at sight any person, living or dead, that is seen astride, beside or anywhere near any four-legged beast, get back home and discover you left the stable doors open last night.

The horse was called “Profits”, as it happens, and was scheduled for the Kentucky Derby.

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Jul 06 2009

What I Learnt about Life and the Markets as a Derivatives Trader – I

Category: Financeadmin @ 1:08 am

It has been a year since I left behind the safe cocoon of technology development for the turbulence and chaos of the global financial markets, joining a prominent Indian proprietary trading firm where I traded American and European equity index derivatives. Though most people who knew me well were aghast (I was informed, in no uncertain terms, that I was ruining my life and my education :D), this was a deliberate, well-reasoned decision.

In many ways the world of financial markets is quite similar to that of entrepreneurship. Both call for much of the same character traits and skills – a taste for risk and gambling, the ability to pursue opportunities down dark alleyways, the ability to exploit one opportunity consistently whilst (I’ve always wanted to use that word – Go Chandler!) jumping nimbly to the next, possibly better one. Finally, success in both professions is determined to a significant extent by the whims of fortune.

Why, then, did I leave safety for danger, steady cash flow for volatile earnings?

Like any other young Indian of my generation, the capital markets had always fascinated me. With any other field, the rewards for excellent performance were not directly reflected in your bank account. This was different.  As trained engineers, we were taught to worship at the altar of design. And, yet, looking at the ravenous nature of the markets, we dismissed the achievements of Soros and Buffett as statistical aberrations, Hamlets churned out by a million monkeys.

I had always wondered, however, if it was possible to create systems that were designed to sail the stormy seas of volatility and bring back treasures. Even if nine out of ten were to be shipwrecked and ruined, I thought, perhaps the remaining one would generate enough revenues to compensate for the others. I believed that my quantitative training would help me sustain an edge over competing traders. I was quite sure that I would be able to out-think the competition. The Fallacy of the Normal Distribution was to be my beast of burden and frequentist probability my weapon of choice.

So did I win? Did it work out as expected? You’ll get to know at the end of this series of posts.

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Jul 04 2009


Category: Lifeadmin @ 2:44 am

The time for grand gestures and flourishes of the pen is over. We live in an age of acute compression now, where full-blown ideas need to be expressed in 140 characters, where soundbites take the place of cogent arguments, where blogs are the new newspapers.

I used to sporadically maintain another blog (if you’ve been diverted here from the Chronicles, salute!), until I realized I had painted myself into a corner (blogs have personalities too, and mine was turning out to be rather schizophrenic).I decided, after a lengthy exile, to start again, this time with more content and less vanity pieces. Appropriately enough, it’s the Fourth of July. Like any other new blog this is mostly empty, but will be filled out as days go by. I shall be more regular in my updates; I think I have a lot of pent-up ideas that need to be expressed.

Hope you find this blog to be as interesting as the previous one was. Cheers.

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