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Paul Wilmott Wants To Retrain and Reform Wall Street's Quants
theodp writes "What if an aeronautics engineer couldn't reconcile his elegant design for a state-of-the-art jumbo jet with Newton's second law of motion and decided to tweak the equation to fit his design? In a way, Newsweek reports, this is what's happened in quantitative finance, which is in desperate need of reform. And 49-year-old Oxford-trained mathematician Paul Wilmott — arguably the most influential quant today — thinks he knows where to start. With his CQF program, Wilmott is out to save the quants from themselves and the rest of us from their future destruction. 'We need to get back to testing models rather than revering them,' says Wilmott. 'That's hard work, but this idea that there are these great principles governing finance and that correlations can just be plucked out of the air is totally false.'"
You know, this is just tinkering. It's a way of passing the buck. It's a way of devolving blame. It MUST be the equations, or the software, or some geek or some technological prblem that caused the economics failures.
It wasn't. It isn't.
The reason why we have economic problems is the same old one from the beginning of time -- good old fashioned human greed.
Equations, and new software isn't going to change that. What you need to do is ensure that the people operating systems and processes are ethical and honest. It's really that simple, and also, unfortunately, that difficult.
Nice idea, but Wilmot seems to have forgotten the most basic law of finance---nothing matters so long as you're making lots of money. Does he really think that the Quants on Wall Street and in London care about robust models and statistical significance? No! We're talking about used car salespersons in $5,000.00 suits. The financial industry is completely amoral. The only law is the law of the jungle. You can't confuse greed with a lack of quality control.