english & general Franchu on 22 Dec 2007 01:30 pm
Book: The hidden layer
I have been reading the book The Hidden Layer by Chris Nordberg
It has been a long time since I was able to spend some time just to sit down and relax reading a non-technical book and this has proved a good choice. It has the adequate dose of technology, suspense and a quick developing plot that makes it entertaining.
The plot can be summarized in the following terms:
- Nice nerdy girl creates an AI software to do automatic trading in the stock market
- Guy tries to find out things about his past
- Lots of action and some interesting revelations
Although for starters it can sound quite utopic to have an AI enabled system to do automatic stock trading it is somehow done nowadays. The people who design and work with these systems are commonly referred to as ‘Quants’. Although systems like the one described in the book are probably not existing today, it is not very far-fetched to consider that in the not so distant future similar things could exist, and probably would mean rewriting the rules that govern the stock markets as it is currently based on uncertainty and random events influencing the prices of stocks and analysts not being able to establish a causal relationship between news and a quantifiable stock price movement.
A ‘quant’ job is to try to minimise the uncertainty and to try to establish a short term causality between inputs from the real world and the inmediate behaviour of the stock prices. Thus by doing intra-day trading they can make significant benefits. That is why ‘quants’ are not necessarily people with a degree in finances, but people with degrees in computer science and mathematicians that know how to optimize the algorithms or people with degrees in telecommunications that know how to connect the computers to the stock trading system in order to reduce the delay between a stock order and its completion in the market. In their jobs every millisecond can cost thousands or millions of dollars/euros/yens/… that is why anyone that can help with improving the latency is regarded as a good candidate.
If you are interested in reading more on how mathematicians and engineers are reshaping some jobs and creating new work opportunities, you can read the article from businessweek.