An interesting article in the Financial Times on Quantitative Traders in the City of London. This featured Mahnoosh Mirghaemi, a 29-year-old Iranian with a PhD from UCL, who joined BNP Paribas in 2011. Mirghaemi described how her boss, a trader with 37 years’ experience, mentioned he could never work out the simultaneous price and position of a trade. She was able to employ a cosine formula from physics to do precisely that. When she wrote it down, her boss apparently just looked at it. “I think I come from the new generation,” Mirghaemi told the FT (whilst emphasizing her respect for her boss) – adding that she felt different and was, “looking at the finance, the economic, the engineering, the computing altogether.”:
One afternoon I met Mahnoosh Mirghaemi, a 29-year-old Iranian who was awarded the centre’s first PhD last October. Mirghaemi brought her thesis with her: “Bayesian Learning in Financial Markets”. Bayesian learning is very voguish among quants at the moment. It uses a probability theory first devised by Thomas Bayes, an 18th-century English clergyman, to create financial models that learn and adapt to new information.
Mirghaemi spent two years using Bayesian techniques to study how European bond markets responded to 3,077 separate releases of economic data between 2007 and 2008. She studied 1.6 million bond trades and figured out which pieces of news moved the markets more, and which ones analysts and traders were more likely to forecast poorly. “It made my eyesight like a double,” she said. But Mirghaemi’s research should now, in theory, allow traders, and trading algorithms, to position themselves better on an hour-by-hour basis. “It definitely makes money,” she said.
Mirghaemi was hired by BNP Paribas last summer. A few months later, her boss – a trader for 37 years – mentioned that he could never work out the simultaneous price and position of a trade. On the spot, Mirghaemi wrote down a cosine formula from physics useful for measuring electromagnetic waves. “He was just looking at it,” she said. Mirghaemi emphasised her respect for her seniors at the bank but she said that she felt different. “I think I come from the new generation,” she said, “looking at the finance, the economic, the engineering, the computing altogether.”
There was a touch, almost, of sympathy in the way that Mirghaemi described colleagues coming to terms with the changing nature of the markets. “Their minds are like, ‘We know as economists this is what is happening, or should be happening,” she said. “But the real world says ‘No.’ The computer systems and all these quant people are changing the market much more rapidly than they actually want to.” And not necessarily for the better. When asked whether she thought all these quants made for more stable financial markets, Mirghaemi looked at me and said: “It is very, very risky and it brings a lot of volatility to the markets and it is out of control.”
Students at the Financial Computing Centre are comfortable making such statements, because they believe they are equipped to handle their implications. When I asked Mirghaemi how this unstable future made her feel, she said: “It puts me in a very good situation.”