My Life as a Quant: Reflections on Physics and Finance

This book was NOT EXACTLY what I was looking for, but I must say it got ahold of me from the beginning and never let go till the end. And in the process, I'm pretty sure I picked up some valuable wisdom whilst enjoying the reading greatly. Let's just say it up front: the guy can write...way better than most, and way better than I really expected of a physicist. I don't know why, but I expected it to be quite dry and....scientific. To be sure, he does lay in some physicist theory stuff, but it never drags (not saying I always followed it all to a T, just saying it was all readable and interesting). Funny, but my only other experience with physics was a lone intro physics course in college, and remember to this day it was the only course I took in which the class burst into spontaneous applause at the final day wrap-up. Maybe physics DOES rock, I don't know. Anyway, this book is more than physics, it' s partly the guy's life, very poignant, and downright touching at times (I think I even feel his deep affection and respect for Fischer Black, who I had never heard of before). And there was plenty of humor in the book as well, subtle and succinct, and in just the right places to make it all so relatable. Even though my primary purpose was to get some insight on financial markets and how they work, by about a quarter way through the book, I had concluded I probably wasn't going to get that. But I was enjoying it so much, I read on anyway. (Good books are not that easy to come by, so take them when they come). And in the end I think I DID get some quite valuable insight on the financial markets, insight that I expect will help me in navigating that tricky world. Particularly, I like his comparisons of the creation of theories in physics, which deal with the immutable laws of the universe, with the creation of theories in finance, which deal with the....let's just say VERY mutable laws of human behavior. If you can get that one little dichotomy down in your thinking about your financial theories, you'll probably save yourself a lot of grief. All in all, a very good read, for your brain AND your heart.

This is a book about a physicist who, after years in academia, goes to work as data and software engineer for Wall Street. It's Derman's experience doing research at major/reputable universities around the world, and his transition over to developing predictive algorithms and analysis for some of the biggest financial institutions.I disagree w/ reviews that suggest Dr. Derman mediocre or nothing special. He worked at very reputable universities and getting a job as a data scientist at a bank is very tough.I give this 3 stars b/c it doesn't go into the physics, finance, or the physics of finance.A published biologist, turned software developer, working at Google could have written a very similar book.For the rest of what I have to say about this book... pretty much what the following 1 star and 3 star reviews say:1 star: https://www.amazon.com/gp/customer-reviews/R3VDTBEFNY2OZN/ref=cm_cr_getr_d_rvw_ttl3 star: https://www.amazon.com/gp/customer-reviews/R1OGRRM421SNIZ/ref=cm_cr_getr_d_rvw_ttl

It is unusual for an ordinary scientist - by that I mean one of the number of working professionals capable of contributing research to major journals but perhaps not winning the Nobel Prize - to write an autobiography. I appreciated Derman for putting down his life story because it has considerable resonance with my own. We were both trained in elementary particle physics and quantum field theory at top universities during the same years, and, due to the Ballet Dancer effect, both of us later had to fiind a transition to some other career path. (The Ballet Dancer effect means that in highly compelling activities such as violin, ballet, or fundamental physics, the tens of thousands of students who become enraptured and devote their early years to these disciplines ultimately come up against the reality that real-life jobs exist only for a very small number. The rest of us open neighborhood ballet schools with names like Miss Pauline's Academy of Dance, or go to work in industry.) Derman conveys some of the excitement of the 1970's as the standard model emerged and looked for verification; a heady time. He was able to make some contributions of his own. He also talks about his life as a graduate student in a department which was not well managed nor concerned with its students' career development, unfortunately all too common.After some frustrating years, Derman ultimately found his metier in financial modeling. Ironically, the best and most collegial academic atmosphere he experienced was not in a university but at Goldman Sachs. There he made significant contributions to the mathematics of derivatives pricing, building on the Black-Scholes model which has been called the only real achievement of economics theory. This part of the book is stimulating and one gets a feeling for the issues and challenges. I was happy that he found himself; also I would say that Derman is too modest - not every theoretical physicist would have his facility and intuition for finance. But what the heck is a swaption?If I had reviewed this in 2004 when the book came out, I would stop here. But following events of the last two years, it is impossible to ignore that the financial innovations Derman worked on - mortgage backed derivatives and obscure risk swaps - are the very ones which came close to vaporizing the world economy. These exotic derivatives, when circulated in large volumes, turned out to have potential for destablizing the entire financial system. Derman's book does not give any indication that the global stability issue was even considered in the overheated trading dens of Goldman.I was reminded of another digression that the physics community took from the path of pure science, namely the atomic and hydrogen bombs. In the latter case theorists were at least decent enough to consider, briefly, whether a thermonuclear reaction set off by an H bomb just might destroy the atmosphere of the earth. The calculations showed that this was not a concern. Probably. At least they thought about it.Maybe there is something about using the powerful methods of physics for unholy purposes that leads to catastrophe. Beyond the derivatives work that Derman and others pioneered, the quantitative and computational approach to trading has more recently become capable of causing global financial singularities within a matter of minutes. Algorithmic and high-frequency trading - where buy and sell decisions are made by computer programs in milliseconds - are now a real concern. These market strategies, which would not exist if not for the quants, are not so much investing as hacking the world's trading system, and we are now in an era of institutionalized selfishness on steroids, with no safety rules or limits. If financial innovators have no concern for global destabilization - or more likely not even the tools to evaluate it - then they are putting us all at risk and there is no other choice but to damp down their activity by heavy handed government regulation. I would like to know what Dr. Derman has to say about that.

Anyone changing career from physics to fintech will find this book highly relatable. It is both explanatory and personal: steering from an in-depth overview of the author's model of dimuon production to the dynamics of academic life, and then from the inception of the BDT model of the pricing of the bond options to the cultural shifts that befell on the fintech industry during the author's tenure at Bell Labs, Goldman Sachs and Salomon Brothers. Remarkably, he was well positioned to witness the revolution fueled by the influx of physicists into the finance, and also by another one fueled by the creation of the Unix programming tools at Bell Labs, leading to a new breed of finance professionals - quants - with unique skills spanning scientific modelling, computer programming, and the grasp of financial derivatives with all its intuitive and messy aspects. Derman is not only an expert in the respective fields, but also a keen observer of human characters (see his personal account of Fischer Black), and writes an especially good prose. A must-read for anyone wishing to know how we got the the highly consolidated world of investment banks.

Very nice autobiography from an esteemed quant. Entertaining, thoughtful, intelligent, informative and funny. Recommended to anyone with an interest in the application of maths to scientific and financial research.

Although this book is written by a quant coming from an institutional setting, I would recommend this book for anyone with an interest in quantitative finance in general. It provides an overview of how Emanuel went from the highly competitive field of physics academia and ended up in Wall Street. He writes very honestly, and it's interesting to hear that even the very able quants, such as Emanuel, still struggled with the same political issues within the organisation as many other quants/techies do - such as the more limited opportunities to become a partner or move into the more lucrative business side of the organisation, as opposed to being viewed as an operational resource.There are plenty of nuggets of useful information in this book, that apply not just to the institutional finance setting. A great example is discussing why individuals are happy to publish quantitative research for consumption by the general public. The reality is that the model is only a part of the solution. You need good systems in place to make the model work, and without the ability to do this, you're not going to get very far with the model alone. He additionally provides insights that reinforce the model development process - such as the need to reproduce results in a paper with your model first, and when developing new models from scratch trying to reproduce discrete results matching your real world observations (such as prices). Although this is nothing groundbreaking, its useful nonetheless to reinforce what you may or may not already know about the field.His discussion of his time working with Fischer Black is also insightful, providing an interesting glimpse into his approach to solving problems. He was not a fan of complicated maths, and would strive to find intuitive solutions to problems, which is refreshing to read considering his legendary status within the field.The book also provides a history of quantitative finance in Wall Street, and an overview of some of the key developments in physics during the 20th century. Emanuel didn't enter Wall Street until slightly later in life, hence the earlier chapters of the book are physics rather then finance centric, which may not appeal to all.If you have any interest in the field, you are bound to pick up some useful insights, making the book a worthwhile read.

I have just finished reading this book. I have found the book informative and thoughtful. Derman, in the book, recounts his life experience starting from his postgraduate studies through his career as a quant to his return to academia. Although derman himself has made significant contributions to finacial theory (BDT model, work on implied binomial trees and 'the smile'), his experiences are much more interesting because he has been a witness of work of some of great minds of 20th century. For example, Derman had been working at Bell labs when Ritchie and Kernighan were developing the Unix operating system and the C compiler. Another instance is collaboration with Fischer Black and his interaction with Robert Merton. Reading about these experiences has shown me some new dots that I can connect with the dots of historical accomplishments of late 20th century.This book is very useful read for quants. It helped me to find ansers to questions like: what pricing models are useful for? How quants in Goldman Sachs worked? How financial engineers need to think different from physicists? And most importantly what really matters in financial engineering?Although this book is one of the very good books that I have read, I will give it 4 stars. I feel that the book contains many tangents, especially in the first few chapters. These tangents might be of interest to some readers but I felt that they were distractions that could have reduced the interest in reading.

This book is simply excellent. It transpires the essence of financial modelling, describing beautifully the struggles and rewards behind it. This book, even though it goes into the detail of the logic behind option models, will make anybody interested in "the golden formula to predict financial markets" understand that it is impossible to learn it from a book. I would recommend it to anybody interested in financial modelling, although it does require some understanding of statistics and mathematics to fully grasp its content.