TAILIEUCHUNG - Stock Market Wizards Part 7

The Quantitative Edge. In offices Situated on the upper floors of a Midtown Manhattan skyscraper, Shaw has assembled scores of the country's most brilliant mathematicians, physicists, and computer scientists with one purpose in mind | DAVID SHAW The Quantitative Edge In offices Situated on the upper floors of a Midtown Manhattan skyscraper Shaw has assembled scores of the country s most brilliant mathematicians physicists and computer scientists with one purpose in mind to combine their quantitative skills to consistently extract profits from the world s financial markets. Employing a myriad of interrelated complex mathematical models the firm D. E. Shaw trades thousands of stocks in more than ten countries as well as financial instruments linked to these stock markets warrants options and convertible bonds . The company seeks to profit strictly from pricing discrepancies among different securities rigorously avoiding risks associated with directional moves in the stock market or other financial markets currencies and interest rates . Shaw s secretiveness regarding his firm s trading strategies is legendary. Employees sign nondisclosure agreements and even within the firm knowledge about the trading methodology is on a need-to-know basis. Thus in my interview I knew better than to even attempt to ask Shaw explicit questions about his company s trading approach. Still I tried what I thought were some less sensitive questions What strategies were once used by the firm but have been discarded because they no longer work k What fields of math would one have to know to develop the same strategies his firm uses K What market anomalies that once provided trading opportunities have so obviously ceased to exist that all his competitors would be aware of the fact Even these circumspect questions were met with a polite refusal to 254 THE NT I TATI ILE answer. Although he did not use these exact words the gist of Shaw s responses to these various queries could be succinctly stated as I prefer not to answer on the grounds that it might provide some remote hint that my competitors could find useful. Shaw s flagship trading program has been consistently profitable since it was launched in 1989. During its .

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