Love Affairs in Melbourne-Chapter 125 - 122 Quants

On the plane to Guangzhou with the Yan family.

Lu Bingran asked Yan Yan, "You’re coming back for a classmate’s wedding, how come you didn’t bring your boyfriend home with you?"

"Too busy, Mom, what do you mean? Are you that eager to kick me out?" Yan Yan complained entirely about how her mother seemed ready to let her go so soon.

"I’m just saying he should come sit at our place, I’m not asking you to have him come over for a marriage proposal. What are you throwing out here?" Lu Bingran implied that Yan Yan was overthinking this.

"So, are you going to feed me for the rest of my life?" Yan Yan playfully stuck out her tongue.

"I don’t think I’m interested in that. I think Qi Yi is pretty good, why don’t you ask your dad? He might be more willing," Lu Bingran kicked Yan Yan’s clingy "ball" away.

"How are things going between you two now?" Yan Dabang asked his daughter.

"How could it be? Of course, it’s better than ever!" Yan Yan replied with a playful smile.

"You should watch your own boundaries," Dad interjected succinctly.

"What boundaries? First tell me, when exactly do you plan on bringing your boyfriend to meet the parents?" Lu Bingran was more concerned about this issue.

"There’s no need to bring him. He will come by himself," Yan Yan answered her mom.

"Really? Then why haven’t I seen anyone come by these past few days?" Mrs. Yan felt her daughter was a bit too confident, but she still enjoyed seeing her like this.

"It’s just not time yet, don’t worry, it’ll happen soon," Yan Yan continued in a coquettish tone.

"You’re in the United States, and the other is in Melbourne, how can it be quick?" Yan Dabang always sided with his wife.

"My parents have properties all over the world, we have plenty of doors in our house, any one of them will do," Yan Yan exaggerated on purpose.

"Which properties around the world?" Yan Dabang was a meticulous tech person.

"Spanning the Southern and Northern Hemispheres, isn’t that all over the world?" Yan Yan asked her dad.

"Is Qi Yi coming to Melbourne?" Mrs. Yan was the first to catch on.

"Yep, he’s coming for my graduation ceremony. Make sure you grill him, don’t go easy on me," Yan Yan suddenly spoke seriously to her parents about the earnest matter.

"Is he really going to Melbourne? Then you’ll meet your uncle and aunt there together," Lu Bingran hadn’t wanted the first meeting with Qi Yi to be such a big affair.

"My Cousin probably already gossiped about it with my uncle and them. We bumped into Qi Yi at the airport coming back from Melbourne," Yan Yan hadn’t told her parents that a member of the Yan family had already met Qi Yi.

.........

On the plane back to the United States, Qi Yi began writing a letter to Yan Yan.

Dear Yan, lover of learning:

Quants are hardly newcomers on Wall Street.

The first Quant on Wall Street dates back to the early sixties.

There was a gambling-loving genius named Edward Thorp.

He held a PhD in Physics from the University of California, Los Angeles and was a professor at Massachusetts Institute of Technology.

In January 1961, he submitted a mathematical paper on gambling strategy to the American Mathematical Society:

Fortune’s Formula: A Winning Strategy for BlackJack.

This paper, disseminated by a reporter from the Associated Press, made Edward Thorp famous overnight.

He had found an invincible code for playing blackjack in casinos through pure mathematical methods.

In 1962, his book revealing the casino codes was published and quickly became a regular on the New York Times bestseller list.

However, casinos opened doors to make money, and Edward Thorp, with his notoriety, became a key target for many casinos.

Eventually, even if he disguised himself, he would be recognized and drugged in the casinos.

Out of necessity, Edward Thorp opted for a bigger "casino," Wall Street.

Since then, Wall Street slowly turned into a realm dominated by mathematicians.

Wall Street had many famous quants, such as mathematicians Benoit Mandelbort, Paul Wilmott, poker experts Boaz Weinstein, Aaron Brown, hedge fund gods Jim Simons, Peter Muller, Ken Griffin, each with their incredibly legendary stories, especially the last three.

By 2007, quants had jointly created a hedge fund market size exceeding two trillion US dollars.

Quants did not consider economic laws but sought mathematical truths in big data.

From the late eighties and nineties until 2007, quants single-handedly crafted a new financial mythology on Wall Street.

At that time, Federal Reserve Chairman Bernanke even delivered a keynote speech titled "The Great Moderation."

He believed that the methods of pure mathematics and computers used by quants had eliminated market volatility and matured the financial markets.

However, it was also quants who led to the biggest, fastest, and most bizarre financial collapse in history—the subprime crisis that began in August 2007 and continues to this day.

This financial crisis is the biggest global economic crisis since the Great Depression.

In fact, whether quants or poker masters, they were all searching for patterns and calculating probabilities.

The probability of stocks, the probabilities at the poker table, fundamentally, are not much different.

But the financial environment is also constantly evolving. freeweɓnøvel.com

Thus, many patterns are only temporary, fleeting; only the patterns yet to be discovered can be converted into wealth.

Some people are more fortunate; they find elusive patterns in economic big data that others can’t, but most quants merely do quantitative research on numerical models.

Only a few can turn complex mathematical formulas and supercomputers into Wall Street’s winning formula.

For quants, it’s no longer the best era because simple mathematical formulas can hardly predict Wall Street after the subprime crisis.

Those simple patterns have been discovered, and the market has long had countermeasures in place.

Those complex patterns can be found and revealed by only a very few individuals among the myriad surface phenomena.

Actually, at its core, Wall Street is quite like a large casino, with some earning money through economic laws like Warren Buffett, whose investment philosophy is based on understanding industries, focusing on what a company produces, the quality, and its prospects.

Then there are the quants who totally dismiss why a company’s stock price might fluctuate, focusing only on the complex numeric variables behind those fluctuations.

In summary, quants continuously use mathematical formulas and computers to calculate probabilities.

It’s quite strange, I find it interesting when you write about fashion, yet why do I feel increasingly uninterested while writing about quants?

I really want to write about how Edward Thorp calculated the unbeatable probability for blackjack, but if I tell you I’ve seriously studied all his papers, would you think I’m a gambler?

Going through old letters this trip back, I discovered that your letters to me are always interesting, while mine seem to just record everyday life.

What should I do? It seems I’m not good at telling stories.

Anyway, just know that your boyfriend is a miner on Wall Street.