Summary:
This is esoteric but not 'secret' knowledge. Most practitioners just aren't up-to-date in quantitative methods, which is why we are where we are.
Originally posted by: soccerballtux
Originally posted by: GeezerMan
Link
A black box program that belongs to Goldman Sachs is stolen.
So Assistant U.S. Attorney Joseph Facciponti tells the judge: ?The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.?
Question: Could it be that Goldman Sachs used the program in that way?
No, this is likely one of their complex hedge/risk balancing programs. If they knew all the things that would set off a buy from the computers in GS, then yes they could use this to force GS (through GS's own automated computer risk management programs) to buy up crap.
Not much to see here IMO, move along...
It isn't much of a black box, any bio-physicist or neuro-science researcher worth his salt is familiar with
Support Vector Machines add that to this line of research
SVM for Finance.
add to that the data-set that a reasonably large company can get about the economy and you have the best tools available for calculating the true price options etc. should be set at.
This is in contrast to the half-useful
Black Scholes Formula that the Harvard MBAs responsible for the most recent crash where using.
fun fact, BSF tells you where the market thinks it should go and well set-up SVMs will tell you where it will go and you can make a pile of money.
I plan on using this myself as soon as I stop being poor and get enough money to invest on the 6month time-scale that this sort of observation will help with.
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