Satyajit Das, author of "Traders Guns & Money - Knowns and Unknowns in the Dazzling World of Derivatives", p.54-
I used to be responsible for showing the trainees around the trading floor. "Look, it's quite simple," I said, breaking down the hierarchy of the trading floor. "There are salespeople - they lie to clients. Traders lie to sales and to risk managers. Risk managers? They lie to the people who run the place - correction, think they run the place. The people who run the place lie to shareholders and regulators." I remembered our quantitative colleagues. "I forgot the quants - our fabulous rocket scientists! When last heard from, they were trying to develope a model for lying,"
"And clients?" one of the trainees asked tentatively. I thought about it for a few seconds. "Clients. They lie mainly to themselves!" To enter the world of derivatives trading is to enter a realm of beautiful lies.
Thoughts and observations for those investing on their own or contemplating doing it themselves.
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Monday, April 19, 2010
Satyajit Das on derivatives
Posted by Robert Wasilewski at 11:03 PM
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That quote truly inspires confidence in the roulette wheel that is Wall Street.ReplyDelete
The quote is a bit over the top but still it shows that when you're playing poker for millions of dollars people are ruthless. And its important to remember it's not just Wall Street. It's pharmaceutical companies, it's professional sports (steroids for example), and it's even the clergy. In "Freakonomics" Levitt showed how they detected teachers cheating on the scoring of tests to get a bigger payout from the government.ReplyDelete
What surprises me is that it appears we may have reached some kind of tipping point. People didn't seem so upset, for example, with municipalities getting ripped off by Wall Street selling them credit default swaps they didn't understand. To me this is a lot worse. At least with the Goldman trade the buyers were sophisticated.
Maybe it's associating the single name Goldman Sachs here.