Tuesday, April 18, 2006

Engineers and Finance....

Mathematical Equations. It seems that this drives the financial institutions here and acrosss the globe. I recently understood and analysed a Model for Credit Risk Modelling using Markov Chain.

Application of Stochastic process. The depth and the capabilities of the problem is good. But comparitively how far away is this models from the real life scenario is still a challenge. Who has a perfect balck box for forecasting.. Answer is no one. If any model can be consistently yiels atleast 20% accuracy there you see the next Bill gates or Warren Buffet ( His intuitions are more or less close to black box).

I understood that many hedge fund managers and finance people know the least about the methodologies involved ( Any way who cares). Exceptions are always there any way. I believe if some can get the best of both the worlds both Quant and Managerial..( Atleast finance people should hire people with Engineering Backgrounds with Strong Financial aptitude)..

But some people grow up other way. They build strong Management skills and build the necessary aptitude . Thats also good. But least preffered just because not much incentive for learning a model... Lolzzz