Quants | The Alchemists of Wall Street

Quants | The Alchemists of Wall Street | VPRO documentary

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14 жыл бұрын

Quants are the math wizards and computer programmers in the engine room of our global financial system who designed the financial products that almost crashed Wall street. The credit crunch has shown how the global financial system has become increasingly dependent on mathematical models trying to quantify human (economic) behaviour. Now the quants are at the heart of yet another technological revolution in finance: trading at the speed of light.
What are the risks of treating the economy and its markets as a complex machine? Will we be able to keep control of this model-based financial system, or have we created a monster? A story about greed, fear and randomness from the insides of Wall Street.
Originally broadcasted by VPRO in 2010.
© VPRO Backlight February 2010
On VPRO broadcast you will find nonfiction videos with English subtitles, French subtitles and Spanish subtitles, such as documentaries, short interviews and documentary series.
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Credits:
Director: Marije Meerman
Research: Gerko Wessel
English, French and Spanish subtitles: Ericsson.
French and Spanish subtitles are co-funded by European Union.

Пікірлер: 1 100

@vprodocumentary 4 жыл бұрын

NEWS NEWS NEWS! We have a vpro documentary, Telegram channel! Check it out for new uploads, spread the word and join! 😉 t.me/vpro_documentary

@booonnoob7950 4 жыл бұрын

vpro documentary can you make another quant documentary?

@592sunrise 4 жыл бұрын

I like to learn new things..I love you vpro

@Marmelademeister 4 жыл бұрын

In my humble opinion as a mathematician, the problem is not the quants modeling financial markets. Those are smart and highly capable fellows. The problem is the decisionmakers in banks, who rely too heavily on the models. No-one can predict the future. Also that's not what quants do. They predict a distribution, not a value, because prediction a value is not possible. Also it's known that the classical models have shortcomings. The quant business is all about doing the best you can to minimize risk. It's better to use a good model with some shortcomings than no model.

@JimMcCann500 4 жыл бұрын

anyone watching this in March 2020? This documentary might as well have been made 2 weeks ago.

@charlie7333 4 жыл бұрын

I m watching this because of the Corona induced gfc

@jimwatchyyc 4 жыл бұрын

The world needs a cooperative stock exchange, or the new “Long Term Stock Market” to turn out to be viable.

@MrJigga420 4 жыл бұрын

game never changes, just the people. be safe mates.

@micheleeve5100 4 жыл бұрын

Well met, and good luck - UK

@CultofThings 4 жыл бұрын

It wasn’t?

@mingy9309 5 жыл бұрын

I did maths from a top university and then did Masters in financial maths - most of the material was useless in the real world. After I just liked the general outline of finance/investing concepts which are far more easier to understand and practical. Later did a Masters in Real Estate Investment & Finance and found that even more practical to life. The only thing a company will care about if they do not understand a Quant with PhD and years of programming/modelling is if he can produce models that make the company money! If the can create correlations between certain data points to give an early trade advantage for the hedge fund. Otherwise it is all useless. In the academic world the concepts are celebrated but in the real world it is all about the $$$'s!

@TaoPiet 12 жыл бұрын

"In the end you can not fool nature" Richard Feynman

@jamiepaul2673 4 жыл бұрын

I think there's only a handful of people in the world that truly understand how some of these derivatives work

@ChampionMobile 13 жыл бұрын

“Some men wrest a living from nature. This is called work. Some men wrest a living from those who wrest a living from nature. This is called trade. Some men wrest a living from those who wrest a living from those who wrest a living from nature. This is called finance.” - ~ Fr. Vincent McNabb

@duudleDreamz 6 жыл бұрын

Great video. Financial mathematicians/computer scientists providing transparency to what really happened during 2008 financial crisis

@revengetrader 11 жыл бұрын

Wow. This is an amazing film about the craziness on Wall Street. Well Done! As a trader myself, this film is a wonderful look at the inside world of Wall Street and the absurdity of the ludicrous optimism and incorrect assumptions made on the street.

@Nick-hg1ys 7 жыл бұрын

Too drunk to truly appreciate this at the moment but I will watch it when I sober up

@vprodocumentary 7 жыл бұрын

Better now?

@TheCatHatRat 6 жыл бұрын

You sober man?

@schrodingerscat3912 6 жыл бұрын

he's got a hang over guys

@HtmlL0v3r 6 жыл бұрын

lol

@glenndewulf5380 6 жыл бұрын

Some say he's still looking for his computer

@TheEightSixEight 8 жыл бұрын

Amazing. Uploaded on March 4th, 2010, and date of 2010 Flash Crash, May 6th.

@Theodore-W 8 жыл бұрын

True. the same as what Wilmott said in the video.

@paultruong154 4 жыл бұрын

"He's my quant"

@DaryllDickens 13 жыл бұрын

Fantastic video. Love how they detailed the banking element as well as the software developers' perspectives. Being a software developer myself, I can relate entirely. Kudos for the great work!

@gintaras58 11 жыл бұрын

I liked this documentary very much. Thanks for uploading! I am an amateur trader of stocks in Europe (in Lithuania). I have never seen such a beautiful presentation of reality - stock "laws" are not Newtons laws and stuff like that...

@jagatdave 4 жыл бұрын

I would caution you about anything that you read through google.. wiki youtube.. Trump is right about one thing.. Lots of fake news. lots of fake ppl..lots of fake theories..

@dragondon 7 жыл бұрын

Mike Osinski was my Prep School Roommate at Saint Andrews, Boca Raton, Florida. We graduated together in 1972. He was always brilliant and a great athlete as well. He was my best friend.....a thousand years ago.

@AndreAndFriends 5 жыл бұрын

Hello from Mr. Kosinski. Almost related. All the best mate.

@tommyakagodjones7642 5 жыл бұрын

donald wilson and a good lover?

@junyoung458 5 жыл бұрын

28:20 hmm... I'm studying mechanical engineering and I am also interested in financial engineering. But this made the point about the difference of physics and financial mathematical models...

@do_not_replytothisemail1421 4 жыл бұрын

18:23-19:35 Most important point in this video. It's Wall St. in a nutshell, especially private equity and hedge funds that benefit from the carried interest loophole.

@Atombender 4 жыл бұрын

Except it's not. The difference between ordinary investment funds and hedge funds is that hedge funds also use their own money to invest. They make an investment and at the same time they invest in something on the other side of the "hedge".

@sweetdosage 7 жыл бұрын

wow....very mind blown - great admiration for these guys.

@diogeneslantern18 5 жыл бұрын

I can hear Emanuel Derman's South African twang the second he spoke. It never leaves you!

@rec1962 4 жыл бұрын

Grotesque accent

@herranonym5725 5 жыл бұрын

I love the style of this documentary! One of the best I've seen IMO.

@vprodocumentary 5 жыл бұрын

Thanks Markus, did you see the other documentaries that talk about finance? Check out our playlist! : kzfaq.info/get/bejne/bLOhktmjqbKyZ6s.html

@man4hire 12 жыл бұрын

I wish I could listen to any of these two men for at least an hour.

@GagnezVizz 14 жыл бұрын

Thank you for posting this video! Much appreciated!! -G

@dennismichael7133 4 жыл бұрын

First time I watched these I dozed off before the 15th minute, now I'm amazed at what I was missing. Thanks YT algo.

@floop2935 4 жыл бұрын

I can’t believe a decade ago was 2010

@yhp99 14 жыл бұрын

Quantitative finance will only continue to grow. As Derman says in the video, it is a question of incentives. Profit will always be a bigger incentive than most anything else at any moment. So ultimately we need a game changer that will systematically prevent toxic conditions. We need to mature as a capitalist society otherwise we might not make it the next time around.

@burlingtonpark4136 9 жыл бұрын

excellant documentary. thanks

@Cypherdude1 11 жыл бұрын

My impression of the quant/programmer who quit and went into the oyster business is, IMHO, he simply got tired of programming. People can get tired of doing the same thing day after day. Programming and higher math can be very mentally taxing. Of course, he went into something radically different. IMHO, he simply burned out.

@theyangrider5905 9 жыл бұрын

This has been the best quant video I've ever seen. definitely worth a second watch.

@ChuckEarnest 8 жыл бұрын

+Alex Yang I've already watched it 3 times and I found it at lunch today. Based on this video I think I definitely need to be in this.

@ClarityRyZze 7 жыл бұрын

So fascinated about quantitative analysis. Im so happy i discovered it before deciding on my masters degree. Just started to study finance and in my free time i lookup courses about linear algebra and statistiks until i am ready to start the quant course!

@waxk9 6 жыл бұрын

ClarityRyZze is there a masters on quantitative analysis

@srimansrini 10 жыл бұрын

This is an informative documentary about the Quants - the people who extensively use mathematical model to predict the stocks in the share and financial markets. Strongly recommended for the people who wants to know the intricacies of financial world.

@P.willow 4 жыл бұрын

This was 10yrs ago. My gosh.. Time had certainly slowed down 🤦‍♀️

@SWIFTerMKD 9 жыл бұрын

Vpro , you are doing an amazing job with this documentaries !

@bySander 9 жыл бұрын

Thanks

@vprodocumentary 6 жыл бұрын

Well, thank you for your comment!

@saveriosalemme5366 4 жыл бұрын

The only reason why I can understand this is because I watched “The Big Short” and “Margin Call” multiple times. 🧐

@ifukill7538 4 жыл бұрын

Big sort

@bamaking45 7 жыл бұрын

Love the book. Now I just found this doc.

@dwight4k 7 жыл бұрын

What book? My life as a quant?

@infiltr80r 13 жыл бұрын

39:20 Two months after Wilmott mentions the "next crash could be within minutes", it happened. Being an algo trader myself, the "speed" of markets is always increasing - it takes less and less time to make the same wave pattern.

@kellingtonlink956 4 жыл бұрын

Thanks for the brilliantly well thought out video.

@OBSESSED1954 7 жыл бұрын

These guys are AMAZINGLY SMART!!!!

@Neanderthalcouzin 14 жыл бұрын

I like the fact that the English guy had come to the realization, and was pointing out, that it was all ultimately meaningless and contrived, and bogus, and they would be far better off dedicating their talents and brains to actual science rather than this financial contrivance.

@P.willow 4 жыл бұрын

This is wayyyy above my brain wave even my postcode

@pibruks 6 жыл бұрын

Amo este canal

@vprodocumentary 6 жыл бұрын

Gracias pibruks! Saludos desde los Países Bajos!

@AzxE10 7 жыл бұрын

God damn, they really make being a financial engineering student sound like a nightmare. Actually it's a whole lot easier than studying physics or pure math.

@dwight4k 7 жыл бұрын

+AzxE10 Mr. Derman doesn't look that confident in his methods. Is the field still worth going in to?

@TheJazzikpeng 6 жыл бұрын

Exactly

@Alfetto8 6 жыл бұрын

Yeah tell that to the physics and math undergraduate students doing the MMF with me, struggling as hell.

@TehGettinq 5 жыл бұрын

Most students that are doing a masters in financial engineering (which is what im guessing you are refering to), are initially physics/math grads.

@alfredhitchcock45 5 жыл бұрын

You are right in that sense: that financial math is "soft" compared with "hard" maths like physics and pure math BUT then again, always remember what the great Isaac Newton said: that he can compute the movement of the stars but not the madness of men. He is brilliant with physics but flunked at investing. So how in the world can you explain that?

@cerebralcaustic 4 жыл бұрын

Joel Tillinghast, fund manager at Fidelity, says the problem with quants can be too much abstraction. They get so caught up in the math they forget they're dealing with shares of a company and not just abstract numbers.

@axe863 13 жыл бұрын

The primary negative effect of the quants was not the extra-ordinary mis-pricing of risk (Gaussian constant volatility vs heavy tailed fluctuations w/ clustering & nonlinear codependency etc), it was the systemic fragility induced by synchronizing the system coupled with risk averse agents that suffer from informational imperfections

@bryanalexander1889 9 жыл бұрын

This opened my eyes alot cause I'm undecided to be in the firm world, great doc!

@ThaFacka 13 жыл бұрын

fantastic! this represents the same view that I have about the micro world of finance ever since.

@ultraverydeepfield 13 жыл бұрын

18:23 nails it

@bennymarshall1320 4 жыл бұрын

I used to tease my economics friends at uni for their endless straight line graphs haha.

@manmanman784 10 жыл бұрын

The problem is not with the quants, it's with the people on top not understanding the math!

@hanksjim4421 9 жыл бұрын

wrg

@Evan-McM 9 жыл бұрын

We're in a transition period, I think in another decade or so this won't be so much of a problem anymore.

@dogestranding5047 8 жыл бұрын

+manu el Quants can't look at the underlying businesses

@veerbhadra994 6 жыл бұрын

manu el .. indeed... including their colleagues in Investment Banks

@veerbhadra994 6 жыл бұрын

Bryan Wheelock ... really ?... #JimSimon

@DsVibe 4 жыл бұрын

Tonally, you refer to yourself similar to my future self from a few years beyond today. 09 26 19. That you aim to empower beneath the surface (of financial success) while also shattering the vastly unrealistic paradigms of those most linearly-oriented upon the surface ... is appreciated, by 100% of the aforementioned on some level within them. We thank you.

@anaselghafari4146 10 жыл бұрын

There is an unjustified mixing of two different things: 1) quant work (quantative analysis) of the like used to price and CDOs and CDSs and analyze portfolios, 2) High frequency trading. The first 37 minutes are focused on quant work, and then (@ 37:45) someone mentions high-freq trading and suddenly the rest of the documentary becomes about that! That is a different topic altogether. The only commonality is that math and computers are involved in both! In fact, the areas where quant work was most infamous, the pricing and risk modelling of CDOs and CDSs, have been entirely devoid of high-frequency trading. The reason is that those derivatives are not very liquid (i.e. do not change hands every minute of the day) and HFT, by definition, requires very liquid markets.

@UnhingedBecauseLucid 7 жыл бұрын

The overarching subject matter is the use of intellectual masturbation veiled in the aura of science to lend to it a purpose it never had legitimacy to have: extortion of unearned, incommensurate amounts of wealth relative to the service provided. It lead to a point where at the height of the crisis, the financial sector was a blob eating 41% of american total corporate profit.

@JohnSmith-to5ow 5 жыл бұрын

Unhinged, That is a brilliant point that I have felt, but never articulated in my own mind. There is an aura of "brilliance" around these people and this work. Of course they deserve it, they are brilliant! But really, what does deserve have to do with it? I could invent a machine that turns puppies into gold bricks. Should it be used?

@CHURCHISAWESUM 4 жыл бұрын

@@UnhingedBecauseLucid hahahaha don't get mad at the quants if that's what you're mad about. Quants are at the bottom pay wise and do the most work tbh. You should be mad at the bond traders if that's your criteria. Or better, the risk management executives

@jagatdave 4 жыл бұрын

@@UnhingedBecauseLucid how did u get 41% number. what do u mean when u say.. eating corporate profits?

@z7ch 13 жыл бұрын

Nice touch with Beethoven's 7th near the end describing Wall St's transformation :)

@HaggardFlea 11 жыл бұрын

The animation at 15:28 is unreal, love it

@idivergentes9031 4 жыл бұрын

Great video, thanks !

@axe863 11 жыл бұрын

I hope that helped :). Integrating this requires knowledge of stochastic calculus. The mean, variance, kurtosis, skewness etc of this process is derived from it's characteristic function

@schrodingerscat3912 7 жыл бұрын

35:21 i like this quote. Paul Wilmott is so awesome, this guy is something else

@dwight4k 7 жыл бұрын

+I am jk It's funny how Mr. Derman doesn't seem that confident in the field quantitative finance, but he still teaches those classes.

@592sunrise 4 жыл бұрын

I am amazed..

@ellabrendairianto5211 7 жыл бұрын

This helps more than school

@dwight4k 7 жыл бұрын

I can't believe that I only found this video yesterday.... 6 years later :-/

@nikolaybonapartov7379 7 жыл бұрын

Me too! Just found it yesterday man!

@vprodocumentary 6 жыл бұрын

Better late than never!

@vprodocumentary 6 жыл бұрын

Just like our comment. Oo'

@abz4852 6 жыл бұрын

Better than me at least, 8 years later~

@vprodocumentary 6 жыл бұрын

Abdullah Yakub, did you like the documentary?

@maxsteelwe 10 жыл бұрын

these people are really smart !

@enotdetcelfer 5 жыл бұрын

Has an almost Ghost in the Shell vibe to it. Nicely done folks, was thought provoking as I study this stuff

@vprodocumentary 5 жыл бұрын

What was wrong with the documentary?

@solomon1486 6 жыл бұрын

thank u

@nishanthvishnu2919 10 жыл бұрын

Where did they get the background scores from - they're awesome?!

@zensir 8 жыл бұрын

This is like watchin the real life version of the "Pi" movie, Darren Aronofsky was ahead of time back in 1998!!

@hindenburg2006 4 жыл бұрын

I forgot about that movie!

@andyb1336 11 жыл бұрын

Very insightful post you're one wise guy, and I don't say that often.

@joelkavanagh1464 4 жыл бұрын

thanx again vpro

@hwy9nightkid 13 жыл бұрын

17:43 - This is the krux of human nature interacting with the financial market..

@joycekoch5746 4 жыл бұрын

On this April Fools Day it warms my heart to know Jerome Powell as such Alchemy to protect us all from financial risk.

@bonefork7472 11 жыл бұрын

Excellent film.

@alfredo40peru 5 жыл бұрын

This documental was the inspiration of producing The big short

@MrAnimeStealth 11 жыл бұрын

"ya dont..." "...no" "well we were really dumbing it down were'nt we" "yeah" "oh dear"

@benzbubblecat 13 жыл бұрын

This video is far out, I learned a lot. I'm doing a masters thesis in computational economics, so I'm sort of an accidental quant.

@steveturpin4242 6 жыл бұрын

Nice one...thanks.

@man4hire 11 жыл бұрын

Very interesting. I'm an econ undergrad, and I don't think any of our further time series / econometrics courses cover stochastic processes. Would you imagine there would be some prerequisites like straight maths for quan(tative finance?) or would a solid econometrics course be considered? Whats your opinion on econometrics.

@berserkus 13 жыл бұрын

"Next crash could be in minutes" - nicely said. This guy is totally right. Remember the may 6 dive on wallstreet

@CarlosRomeroconnect 10 жыл бұрын

Amazing video

@ruralkiller 11 жыл бұрын

i see your point and it is a good one...

@alexcheng0808 11 жыл бұрын

can anyone tell me the musical pieces used in the soundtrack? specifically the one starting at 43:28 thanks

@wallstreetbravado346 4 жыл бұрын

"Hey!!! I like your channel. It is content rich. Keep making informative videos. ▶️📺🎥🙌🏽💥"

@MarcFromNijmegen 11 жыл бұрын

Beethoven's Symphony no.7 in A major, Op.92

@mini1gerbel 10 жыл бұрын

anyone know if majoring in financial engineering is the right way to go to become a derivatives structure or should I stick to something more maths based?

@Auricson 6 жыл бұрын

very good video

@distroyaar 10 жыл бұрын

soundtrack from Moon (2009)!

@harendrasingh_22 4 жыл бұрын

28:37 true. Its just too emotional a thing !.

@Marc_Masters 5 жыл бұрын

Interesting work

@TheSMFTRADER 12 жыл бұрын

Nice work!

@haydenbrophy9460 4 жыл бұрын

WHATS THAT SONG 44:15

@isaiahheath5563 10 жыл бұрын

44:12 What is the name of that classical song?

@kevinolson1835 9 жыл бұрын

***** God bless you Karl - I.ve been all over Google trying to figure that out!

@hikmetcoskun757 4 жыл бұрын

It's Beethoven - Symphony No.7, 2nd movement: kzfaq.info/get/bejne/rKl4haiqqpurqoU.html

@marcelozilotti 12 жыл бұрын

18:25 really interesting graphic and explanation

@butterbean2789 4 жыл бұрын

Brilliant

@johnsmith1474 5 жыл бұрын

"My wife and I would wake up after having had the same nightmare, eventually we realized we didn't know what day it was ...." Guess what pal? Ordinary working people have the same exact issues working their jobs.

@tobir693 5 жыл бұрын

Well not really. Most ordinary people know exactly what day it is. Or at least how many days until the weekend. The thing with Physically demanding work, 99% of people (in the US, idk about third world countries) will get Saturday and/or Sunday off. With this kind of work you never stop, because you can't. It breaks you mentally. But then also, as he said, it's hugely rewarding when you stay awake for three days and figure out a problem that would have caused a catastrophe otherwise.

@2424151tamroes 11 жыл бұрын

show us this wonderful model and allow us mere mortals to gaze in awe!

@TimSchaeferMedia 11 жыл бұрын

A great movie about Wall Street, CDOs and trading.

@carterjwillow3079 4 жыл бұрын

I feel working from home is key to wealth creation, considering how remunerative investing on the online market can be. I begin to wonder what if I got into it much earlier on..

@MO-kg7tr 10 жыл бұрын

Paul Wilmott and Emanuel Derman seem to both absolutely hate the finance industry and love the pure math/physics. I don't understand how two highly regarded lecturers in the field of quantitative finance can dislike finance so much.

@bamsemann123 9 жыл бұрын

Mario Ostojic its called integrity

@MO-kg7tr 9 жыл бұрын

kris hall fair point but then why do they dedicate their lives to teaching that which they hate so much?

@dwight4k 7 жыл бұрын

+Mario Ostojic That's the right question. Maybe the pay it better?

@MO-kg7tr 7 жыл бұрын

+Dwight Dunker While that's probably true, academia isn't quite the right place for people wanting to maximise their income. I imagine top researchers at quant funds and consultancy companies are much better off.

@dwight4k 7 жыл бұрын

Mario Ostojic They've probably made enough money already. So now they can just chill and relax. By the way... the pay for finance professors is among the highest in academia.

@axe863 11 жыл бұрын

The complexity of a cash CDO is higher than that of a diversified portfolio containing securities with varying tail thickness and co-dependencies because it, also, depends on the opacity of subordination (supersenior tranche, PIK etc) , the width of tranche (thicker tranche ==> lower macro-sensitivity, thinner tranche==> high macro-sensitivity), the weight of nth order securitized securities in the reference portfolio (CDO, CDO^2..CDo^n=> a tranche included CDO's==> macro-hypersenitivity)

@olivergeron8180 4 жыл бұрын

35:40 best line ever!

@plutonium6280 4 жыл бұрын

16:35 "Manager just has to belive the cuant" hahaha

@Failucation 9 жыл бұрын

39:00 The next crash could happen within minutes. Flash Crash 2010.

@djbanizza 8 жыл бұрын

Brandon Gordon Yeah that guy knows his stuff

@guyguy1811 6 жыл бұрын

Yeah I though that; how incredible. Defiantly validates himself in that regard.

@JD-im4wu 4 жыл бұрын

Yup I caught that one as well! :)

@chrsjav 11 жыл бұрын

What is the classical song at 43:26?

@axe863 11 жыл бұрын

The Black-Scholes partial diff equation is derived in undergrad math courses. In grad math courses, far more realistic models are taught. I learned how to model options with multi-scale stochastic volatility and inhomogeneous jump processes==> spdde. Black- Scholes is an extremely simple case.