I am in the wrong business

[Cutter]

I just came to the horrible realisation that I am in the wrong business:

May 25 - Financial Times (Stephen Schurr): "James Simons of Renaissance Technologies and T. Boone Pickens Jr. of BP Capital Management raked in $1.5bn and $1.4bn in 2005, putting them at the top of the Institutional Investor's Alpha magazine list of the Top 25 highest paid hedge fund managers... This year's list...markets the first time two fund managers have earned more than $1bn. The 26 hedge fund managers on the list earned $363m on average - up 45 per cent from the $251m average in 2004."

See you guys later

Just kidding, but I think I might have some ideas on what my next career will be in.

[Hylo]

I studied accountancy at university and did a lot of modules in finance and capital markets theory. Guess who wishes he hadn't become infatuated with the internet in the university libraries instead of studying harder and paying more attention in finance class?

(Only kidding although those are serious figures those guys earn. Frightening amounts of money actually)

[Cutter]

I have a very strong interest in the finer points of economics, but when it comes to actually doing math I am a complete klutz. I was reading about some of the derivative instruments that traders can buy now which require an advanced mathamatics degree to even understand.

[Selkirk]

Pretty good gig if you can get it.

[Todd W]

Highrisk and way to stressful for me.

[Hylo]

I did some web development work on placement about five years ago with a financial services software company who make the kind of derivatives software Cutter is talking about.

They had no interest in hiring Java or C++ programmers for that part of the operation, instead they only hired people with PhD's in Maths as they were the only ones who could understand the workings of the financial systems and it was easier to teach these guys to code than to teach advanced maths to a bunch of programmers.

I was on the other side of the room with the web project crowd doing ASP while the eggheads did the real work...

[Cutter]

Thats a great quote, "it was easier to teach these guys to code than to teach advanced maths to a bunch of programmers."

Here is an example of one of the derivatives, a variance swap: http://en.wikipedia.org/wiki/Variance_swap

[r2d2]

You mean this doesn't make sense to you??:

The variance swap may be hedged and hence priced in an almost model-independent way using a portfolio of out of the money put or call options at each strike weighted by the inverse of the strike squared.

I kind of know about most of the terms in there - but put them together like that, and my brain just begins to smoke...

[Cutter]

I don't feel some dumb anymore, this is from the Financial Times:

"Errors in trading complex credit derivatives among Wall Street banks doubled last year. The figure highlights the operational risks that are faced by the world's biggest financial institutions in keeping track of the rapidly growing $17,000bn market. One in every five credit derivatives trades made by big dealers initially contained mistakes, according to a survey from the industry's leading lobbying group, the International Swaps and Derivatives Association."

[John]

huh