An interesting question on Slashdot: What is the future for Financial Mathematics?

[Chris Coles]

| Future of Financial Mathematics? |
| from the it-has-none-get-over-it dept. |
| posted by kdawson on Saturday April 25, @17:19 (The Almighty Buck|
| http://news.slashdot.org/article.pl?sid=09/04/25/1858223 |
+--------------------------------------------------------------------+
An anonymous reader writes "[0]Nassim Nicholas Taleb, a famous '[1]Quant,' has long been a strong critic of the use of mathematics and statistics in the financial markets. He has been very vocal in his books [2]The Black Swan and [3]Fooled by Randomness. In [4]his article on edge.org, he says 'My outrage is aimed at the scientist-charlatan putting society at risk using statistical methods. This is similar to iatrogenics, the study of the doctor putting the patient at risk.' After the recent financial crisis, wired.com ran an article titled 'Recipe for Disaster: The Formula That Killed Wall Street' in which the quant David Li and his [5]Gaussian Copula were crucified b we [6]discussed it at the time. Now, I've recently been admitted to a graduate program of good repute in Computational & Applied Mathematics. There is a wide range of subjects in which you can pursue your PhD, one of them being Financial Mathematics. I had a passing interest in it for quite some time. In the current scenario, how advisable it is to pursue a PhD in this topic? What would my options be five years down the line? Will the so-called 'quants' still be wanted by the banks and other financial institutions, or will they turn to more 'non-math' approaches? Would I be better off specializing in less volatile areas of Applied Mathematics? In short, what is the future of Financial Mathematics in light of the current financial crisis?"
Discuss this story at:
http://news.slashdot.org/comments.pl?sid=09/04/25/1858223
Links:
0. http://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb
1. http://en.wikipedia.org/wiki/Quantitative_analyst
2. http://en.wikipedia.org/wiki/The_Black_Swan_(Taleb_book)
3. http://en.wikipedia.org/wiki/Fooled_by_randomness
4. http://www.edge.org/3rd_culture/taleb08/taleb08_index.html
5. http://en.wikipedia.org/wiki/Gaussian_copula#Gaussian_copula
6. http://news.slashdot.org/article.pl?sid=09/03/03/036223&tid=98

[marvenger]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

all their models have blown up, really systematic this time. It has to be of declining relevance. Maybe Steve Keen's dynamic analysis is deemed pretty cool and solver of all problems and is next to be abused.

[petertribo]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

In short, what is the future of Financial Mathematics in light of the current financial crisis?"

Much, much bigger question could be "what is the future of Science in light of the current financial crisis?" (I believe Taleb indicates there is a much bigger problem than just in Finance/Economics.)

The current financial crisis has proven that Mathematics (a subset of Science) can be corrupted and Snake Oiled for Greed. See the thread From Voodoo Economics to Voodoo Medicine to see how Medicine (a subset of Science) has been corrupted by Greed. Need I mention how BIG PHARMA has repeatedly corrupted Science for Greed?

So, will all aspects of Science become corrupted for Greed and Profit. If not, why not?

I have listened to a number of talks from The Long Now Foundation related to this subject although the Speakers generally avoid any analysis of how Science can be corrupted and falsified by Greed.
http://www.longnow.org/projects/seminars/

[marvenger]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

in the capitalist system problems aren't solved unless you can make money out of it, there lies the source of your corruption. Being in the business of solving problems to make yourself irrelevant is not predominant, best to keep the problem there. same goes with financial maths, blackscholes etc was meant to create stability, you can't make money out of stability, whats the point of that in our system?

[*T*]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

Much, much bigger question could be "what is the future of Science in light of the current financial crisis?" (I believe Taleb indicates there is a much bigger problem than just in Finance/Economics.)

The current financial crisis has proven that Mathematics (a subset of Science) can be corrupted and Snake Oiled for Greed. See the thread From Voodoo Economics to Voodoo Medicine to see how Medicine (a subset of Science) has been corrupted by Greed. Need I mention how BIG PHARMA has repeatedly corrupted Science for Greed?

So, will all aspects of Science become corrupted for Greed and Profit. If not, why not?

I have listened to a number of talks from The Long Now Foundation related to this subject although the Speakers generally avoid any analysis of how Science can be corrupted and falsified by Greed.
http://www.longnow.org/projects/seminars/

This is why scientific research should not be commercialised...

[TRake]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

The current financial crisis has proven that Mathematics (a subset of Science) can be corrupted

I strongly disagree that math is a subset of science. Which do you think came first? Very smart mathematicians are often wrong. I said this on another post, but even Einstein felt bad after he made the bomb.

[marvenger]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

how do you distribute the the benefitsof this research then? established businesses have to bid for the rights and the proceeds going to more research and social causes? This is massively prone to manipulation. The pentagon already does much subsidised hightech research and hands over technologies to the private sector once commercial.

[flintlock]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

I think there is too much emotion and irrationality in markets to rely on mathematics. If this stuff worked they'd all be working for the Warren Buffets of the world and we'd never hear a peep about it. Maybe the successful ones already do!

[TRake]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

Maybe, but I think it is simply that we don't have a mathematical model for all human behavior. There is a new mathematics called "chaos" mathematics. I have only breifly studied this new math.

[GRG55]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

Much, much bigger question could be "what is the future of Science in light of the current financial crisis?" (I believe Taleb indicates there is a much bigger problem than just in Finance/Economics.)

The current financial crisis has proven that Mathematics (a subset of Science) can be corrupted and Snake Oiled for Greed. See the thread From Voodoo Economics to Voodoo Medicine to see how Medicine (a subset of Science) has been corrupted by Greed. Need I mention how BIG PHARMA has repeatedly corrupted Science for Greed?

So, will all aspects of Science become corrupted for Greed and Profit. If not, why not?

I have listened to a number of talks from The Long Now Foundation related to this subject although the Speakers generally avoid any analysis of how Science can be corrupted and falsified by Greed.
http://www.longnow.org/projects/seminars/

You people are off base, to the point of being offensive.

It is NOT Mathmatics [or Science] that is corrupted. It is the Mathmaticians...the ones that decided to become quants...that were corrupted gentlemen. Corrupted in exactly the same fashion, and by exactly the same motives, as the CEOs, CFOs, "Risk Managers", shareholders, Boards of Directors, Treasury Secretaries, Central Bank Governors, and oh so many others in the long descent into this catastrophe.

The vilification of mathmatics and science is not only misplaced, but dangerously counterproductive.

[petertribo]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

This is why scientific research should not be commercialised...

I agree there are some potentially Life ending possibilities with the commercialization of Science. Here is a year 2000, 11 page WIRED article on the subject by Bill Joy, cofounder and Chief Scientist of Sun Microsystems:

Why the future doesn't need us.

Our most powerful 21st-century technologies - robotics, genetic engineering, and nanotech - are threatening to make humans an endangered species.

From the moment I became involved in the creation of new technologies, their ethical dimensions have concerned me, but it was only in the autumn of 1998 that I became anxiously aware of how great are the dangers facing us in the 21st century. I can date the onset of my unease to the day I met Ray Kurzweil, the deservedly famous inventor of the first reading machine for the blind and many other amazing things.

http://www.wired.com/wired/archive/8...ic=&topic_set=

As a businessman and scientist, Joy has a lot of credibility and he is not optimistic about where Science may go.

I even read some of the material referenced by Joy in his footnotes. I find it incredible that there is not more discussion and, frankly, alarm about this subject. As pointed out in this thread, the failure of economics may presage the failure of other Science. If anyone here has any further works, references or debates about it please post the links.

[Spartacus]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

Seconded.

I've noted several times, I think Rajiv has too, how "professionals" put in warnings that get taken out by sales people and managers.

EDIT: here ya go ... Rajiv's link
http://disciplinedminds.tripod.com/


OR how professionals are pressured to obscure their warnings - the interview Rajiv posted some time back was really good on this point, although more slanted toward other pressures to be more conservative ...

And considering Taleb is Catholic[*] and threw stones at Dawkins ... he's talking about demanding proof?

And if he's Catholic (not Eastern Orthodox)
He's talking about corruption?


oh, PLEEEAAAAAAAAAAAASE (rolls eyes till they disappear in the back of his head)
[*] or Eastern Orthodox, based on the pictures he showed at one talk

You people are off base, to the point of being offensive.

It is NOT Mathmatics [or Science] that is corrupted. It is the Mathmaticians...the ones that decided to become quants...that were corrupted gentlemen. Corrupted in exactly the same fashion, and by exactly the same motives, as the CEOs, CFOs, "Risk Managers", shareholders, Boards of Directors, Treasury Secretaries, Central Bank Governors, and oh so many others in the long descent into this catastrophe.

The vilification of mathmatics and science is not only misplaced, but dangerously counterproductive.

[medved]

Re: An interesting question on iTulip: What is the future for arithmetic?

You people are off base, to the point of being offensive.

It is NOT Mathmatics [or Science] that is corrupted. It is the Mathmaticians...the ones that decided to become quants...that were corrupted gentlemen. Corrupted in exactly the same fashion, and by exactly the same motives, as the CEOs, CFOs, "Risk Managers", shareholders, Boards of Directors, Treasury Secretaries, Central Bank Governors, and oh so many others in the long descent into this catastrophe.

The vilification of mathmatics and science is not only misplaced, but dangerously counterproductive.

My outrage is aimed at the accountant-charlatan putting society at risk using arithmetic. We lost trillions of taxpayer dollars and the world financial system is in danger because of arithmetic. And our kids are brainwashed with this stuff starting from kindergarten. It does not add up. :rolleyes:

[flintlock]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

Ban all Math and Science now!

[allenjs]

Re: An interesting question on Slashdot: What is the future for Financial Mathematics?

Seconded.

I've noted several times, I think Rajiv has too, how "professionals" put in warnings that get taken out by sales people and managers.

EDIT: here ya go ... Rajiv's link
http://disciplinedminds.tripod.com/


OR how professionals are pressured to obscure their warnings - the interview Rajiv posted some time back was really good on this point, although more slanted toward other pressures to be more conservative ...

And considering Taleb is Catholic[*] and threw stones at Dawkins ... he's talking about demanding proof?

And if he's Catholic (not Eastern Orthodox)
He's talking about corruption?

Taleb's ancestors were Lebanese Christians, but he is not a Christian. He expresses more sympathy toward stoicism than toward Christianity. He has addressed this point directly.

Regarding Dawkins, I cannot understand how people think the guy is God. His contributions to science stopped 20 years ago, and he's produced nothing but strident evangelical screeds since then. It's amazing that the guy can make an entire career off of finding new ways to say: "Stop the presses! Everyone has been terribly wrong for centuries! The truth is, MAN WAS FORMED FROM DUST!"

The whole hero-worship of Dawkins, and the cult of militant materialistic reductionism, shows a sort of brainwashed mentality similar to the religious nuts.