Book Review: The Quants

In the book The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It (Amazon,) Scott Patterson provides a peek into the world of quantitative finance with the meltdown of 2007/2008 as a backdrop.

The book is gripping. It almost reads like a whodunit. It is like a modern-day update to Schwager’s Market Wizards series. However, I am not sure I agree with the book’s narrative that quantitative models caused and made volatility worse. In reality, an unwind of any crowded trade can trigger a doom loop of volatility. And in a margin call, the most liquid assets are the first to go. Secondly, for a book that covers statistical arbitrage, long/short value and momentum strategies and capital structure arbitrage using credit default swaps, missing Bridgewater and their risk-parity model is a big one.

Recommendation: Worth a read.

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