Wall Street Awaits

I have been quite busy lately applying for jobs in finance. As it turns out, there is a well-worn path between academia and wall street, with phyiscist-cum-bankers sitting at the prop trading desks of Goldman Sachs, building models for PIMCO, and doing risk analytics for Moody's.

For an example as to WHY Wall Street might be interested in physicists and mathematicians, think about a typical pricing problem: suppose you want to buy the right to buy a stock in, say, six months. This might be a bet of a speculative nature (if you think the stock will rise), or it might be to hedge a position (perhaps you sold someone an option to sell that stock in six months). The question is, what's the fair price for that option? These are basic gambling problems, and the idea is to find out the best and worst possible outcomes, then put some odds on those outcomes, and then find the expected return.

The difference between, say, playing blackjack and pricing options is that we have a good model for the evolution of stock prices. For example, in a card deck, the previous card is no indicator of the next card---there is no correlation between the cards in the deck. However, given that a stock closes at 50 today means that it is very unlikely for the stock to close at 0 tomorrow, or 100. The crucial observation is that the stock price is a directed random walk, like a walk down the beach---if your're not paying attention, you walk mostly in one direction, but never in a strait line. The less attention you pay, the less of a straight line you walk. This is called the volatility of the stock price: the stock price is evolving mostly in a single direction (called the drift). (If you look at the history of a stock price in, say, the Wall Street Journal, you'll see a line that represents the 65 day moving average, or the 200 day moving average. This is the drift rate of the stock.) The deviations around the average motion are due to market volatility.

So given the drift and the volatility, we can build a model (called the Black-Scholes model) which models the evolution of asset prices. Given this, we only need to figure out the spread of possible outcomes (best case and worst case scenario), handicap those possibilities, and then price the option.

Anyway, I have had interviews with some big companies, and am excited about the whole prospect. Next week I fly to Vancouver to talk with a financial software company, and I have a follow-up phone interview with a major investment bank in NYC. There's also another company in Connecticut that builds trading software, and has a prop trading desk---I talk to them again the week after next.

Hopefully I will start posting semi-regularly again.

And so it begins...

There's no turning back now...

Snow Days

Over the past week or so, we've had about 10 inches of snow in Columbus. Daisy and I spent the better part of yesterday shoveling the sidewalks. Some of us contributed more than others.

Ben Takes on the Dog Food Nazis

Since I've had a puppy, I've been trying to decide what kind of food I should feed her. Lefty (my last dog) was pretty happy eating Science Diet, but I never did any proper research about dog food, so I tried to enter into the field with an open mind.

As it turns out, if you do a google search for "dog food comparison", you find mostly product comparisons between "our brand and Brand X"---in other words, I would believe these comparisons as much as I would believe a comparison between Coke and Pepsi on coke.com. If you really look hard for some unbiased information about dog food, you won't find any. Most websites are clearly biased towards ``natural'' or ``organic'' dog foods. There are even several websites that insinuate that feeding a dog kibble, as opposed to raw foods like whole raw chickens, eggs, and organ meat, is tantamount to a violation of human rights.

Now, this seems like a good question to ask some ``experts''. And by experts, of course, I mean dog owners on an internet forum. Let me post some actual quotes...

Poster: vets get little teaching in class on foods. And the majority they get taught is by science diet (and other "high end" dog foods) company, so its a little biased teaching.

BenTheMan: Do you have proof of this, or is it something you've just heard other people saying?

Poster: [Posts link to a 1 year program for assistant vet technicians]. in a 1 year program 15 "lessons" 2 are out of class placements and 2 are repeat type of courses. 1 is animal nutrition. in a semester with 7 different classes in it. it is obviously not a long period of time to learn all about dog food.

BenTheMan: This is NOT a vet program, this is not even a vet technician program. This is a one year program for people who assist vet technicians. You do know the difference between vets and vet technicians, right?

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Poster: Also, my dog recently ate a few kernels of boiled corn off the floor while we were cooking and the next day, she pooped them out completely whole and undigested. Which makes me question food with corn in it, if my dog can't digest the corn she 'stole' off the ground, what reasons do I have to think that corn meal can be digested by her?

BenTheMan: Haven't you ever noticed the same in...ahem...your poop? It doesn't automatically mean that corn is bad for you, even if it shows up undigested in your poop.

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Poster: Or once I heard somewhere that raw veggies make cancer grow slower so if I had cancer, even if it's completely unproven I would still try to eat raw veggies.

BenTheMan: And if you heard that making hats out of tin foil could prevent the government from reading your thoughts, would you try that, too?

Needless to say, the words ``logical fallacy'' are lost on these people.

More Daisy

Here's a few more Daisy pics. She is a cutie...





I still have a blog post to write about Amsterdam, where every day is April 20.

Puppy!

Yesterday we adopted a new puppy, Daisy. She is part beagle and part ``hound'', which sounds better than ``we don't know''. I think she's a keeper.


I spent the afternoon trying to teach her how to sit and take derivatives.

At least she can sit.


Either way, I'm looking forward to teaching her all kinds of things, like ``Go catch some squirrels'' and ``Go get me a beer.''

St. Nikolai Church: Hamburg

A few days ago, I took the train to see a monument that I had heard about: St. Nikolai's Church, in Hamburg:
St. Niolai Church in Hamburg (or Nikolaikirche) was finished in 1863, and was the tallest building in the world for a few years.
It was largely destroyed in July 1943 when Allied forces heavily bombed the city. While the city did house a naval base, many parts of the city (including some predominantly civilian areas) was leveled.
Today, what's left of the main spire and the nave are open to the public, and has been turned into a memorial.
The spire is covered in soot, and still bears the scars from Allied bomb shrapnel, and stands as a testament to the horrors of war.
For a few euro, you can ride an elevator to the top of the spire, where there's a small observation deck and some information about the church's construction, and the bombing campaign that destroyed most of the city. The view really is quite impressive: