market action, how can this play out?

[irunnotgood]

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The market is charging.........good chance it may end up by sessions end.

Down 50.43 currently...........

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Ya right...... [img]/images/graemlins/tongue.gif[/img]

The DOW closes down over 205.00 pts!

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Please keep making stock predictions so I can fade and get rich.

[Fishhead24]

You could certainly do worse elsewhere. [img]/images/graemlins/smile.gif[/img]

Once in awhile I find an acorn or two.

-FH-

ps-my prediction(which isn't much of one), is one I made a couple months ago that the Dow would not finish above 14,000 at years end. At the sametime, Jim Cramer prdicted it would finish above 14,500. At this time, invested very small in the stock market.

[DcifrThs]

brag/beat/BRAG:

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PS- on a random personal note, i just got back from an interview w/ a consultancy firm in CT that might want to bring me in to head up their capital markets research group (that currently doesn't exist and that they acknowledged they are weak on) and devote my time there to forming original views as a base from which they could assess the managers they are currently thinking about recommending to clients.

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well, turns out that i'm "over qualified" for their position...though i got ridiculously positive feedback on my interview (they said i "was extremely impressive" and "blew them away")... i think that they were just unwilling to even come near my previous salary for the position which they'd like to create.

but, when life closes a door, it opens the side of a barn:

a former classmate (valedictorian of my MBA class) of mine sent me and a few others an email regarding the need for a VP level position at one of the top 3 investment banks for which he works. it didn't fit my passions or skill-set but i emailed him back and he was more than happy to help me find a more suitable role at his bank...

in less than one day, he got me submitted to this one:

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QUANTITATIVE ANALYST – 07032355
Job Description

QUANTITATIVE ANALYST

Overall Purpose: To participate in the development of systematic trading models and the ongoing evaluation of trading strategy performance, both in terms of risk profile and P & L performance, within the systematic trading desk of the algorithmic trading business.

Key Responsibilities: The systematic trading area of the proprietary trading desk is concerned with the initiation and day-to-day management of rules based trading strategies. Proposed strategies are always back tested on historical data as part of the validation procedure for a new idea. The post holder will be primarily concerned with carrying out research and development of these strategies. He/she will also provide advice and guidance to other members of the team in his/her areas of expertise in order to enhance the knowledge level of the group as a whole.

It will also be a responsibility to actively monitor and record both the P&L generated by and the risk profile of trading strategies for which the post holder has responsibility.

Decision Making: The post holder is expected to decide on appropriate analysis techniques for their own use and have the primary voice in the interpretation of the results of analysis performed.

Decisions as to the level of risk run within the models for which the post holder has responsibility are to be referred to the head of the systematic trading area, as are decisions on risk limits or mechanical risk limiting strategies.

Decisions as to data set to be examined for any given candidate trading strategy are expected to be made jointly within the group. Furthermore the post holder is expected to contribute to the decisions on the composition and relative risk weightings of the portfolio of models run by the systematic trading business as a whole.

Immediate priorities: Over the next 3 months it is expected that the post holder will open up some recently available data sets and either apply techniques already developed within the group or their own methods of analysis. Over a 6-month timeframe it is expected that the post holder will advance new methods for the selection of likely profitable systematic trading strategies. Over a 12-month time frame it is expected that the methods already defined by the post holder will be applied to generate at least one credible candidate trading strategy.

Bases for measuring performance: This will be measured in two distinct ways, the generation of trading return from proposed and accepted strategies and the contribution to the model development and monitoring process. The first of these is a purely quantitative target, the second will require management judgment, in conjunction with a detailed set of goals, exercised in the same way as for existing employees in this business area.


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that is basically my dream job and he is personally going to contact the hiring manager on my behalf to set up at worst a phone interview and ideally a personal one.

hope it works out [img]/images/graemlins/smile.gif[/img]

Barron

PS- why don't paragraph spacings work out here in the quote above?

[hawk59]

Barron,

Not being negative because I hope you get the job but do you really think evaluation of the 'risk profile' or VAR of a fund has any connection with reality?

[DcifrThs]

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Barron,

Not being negative because I hope you get the job but do you really think evaluation of the 'risk profile' or VAR of a fund has any connection with reality?

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not so much obviously (see the mandelbrot thread).

but there needs to be some logical methodology on which to weight the relative weightings of a bet withing a trading system.

i think the next step is the use of BM's MMAP (multifractal model of asset pricing) in the construction of portfolios and the application of risk weights (however you want to define them).

i think it is a near certainty that i'll be asked about stuff like this if i do get the interview.

Barron

[Soya]

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the next step is to figure out how to price a CDS spread based on the cost of the insurance.


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It's basically an underwriting issue that depends on a number of characteristics of the underlying assets. In the case of a tranche of subprime mortgages it will depend on the credit quality of the borrower, the degree of overcollateralization, the payment priority, the degree of geographical diversification, home price appreciation, and relatedly, the ability to recover on defaults. While there is a fair bit of variation in the way CDOs are set up, a typical scenario for a aaa tranche is a right to the first three years of payments with a substantial degree of overcollateralization.
Again it varies by CDO, but for most of the asset-backed aaa tranches it would take a nationwide real-estate meltdown of catastrophic proportions for these tranches to suffer significant losses. That said, there is some hurt in store for the bagholders on aa and below and for those stupid enough to make massive leveraged bets on anything that is marked to market in this area.

[gonebroke2]

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Again it varies by CDO, but for most of the asset-backed aaa tranches it would take a nationwide real-estate meltdown of catastrophic proportions for these tranches to suffer significant losses. That said, there is some hurt in store for the bagholders on aa and below and for those stupid enough to make massive leveraged bets on anything that is marked to market in this area.

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A nationwide meltdown of catastrophic proportions is going to happen. Did you mean to say marked to model instead of marked to market? All the subprime and most of the alt-A CDOs are going to end up worthless once they are properly marked to market. The losses are going to exceed 1 trillion dollars. Anyone who didn't see this coming is an idiot. My favorite story of this entire housing boom is when I read an article about a 14,000/yr illegal alien strawberry picker in california who qualified and purchased a $720,000 home. I wonder how Helicopter Ben Bernanke is going to handle this mess. Hyperinflation?

[DcifrThs]

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Again it varies by CDO, but for most of the asset-backed aaa tranches it would take a nationwide real-estate meltdown of catastrophic proportions for these tranches to suffer significant losses. That said, there is some hurt in store for the bagholders on aa and below and for those stupid enough to make massive leveraged bets on anything that is marked to market in this area.

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A nationwide meltdown of catastrophic proportions is going to happen. Did you mean to say marked to model instead of marked to market? All the subprime and most of the alt-A CDOs are going to end up worthless once they are properly marked to market. The losses are going to exceed 1 trillion dollars. Anyone who didn't see this coming is an idiot. My favorite story of this entire housing boom is when I read an article about a 14,000/yr illegal alien strawberry picker in california who qualified and purchased a $720,000 home. I wonder how Helicopter Ben Bernanke is going to handle this mess. Hyperinflation?

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so how much money did you make off of your bets against securities backed by subprime mortgages?

what bets did you take and how did you size them?

when was your entry point?

if not in those securities, how did you profit off of the situation you foresaw?

thanks,
Barron

[Soya]

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A nationwide meltdown of catastrophic proportions is going to happen. Did you mean to say marked to model instead of marked to market? All the subprime and most of the alt-A CDOs are going to end up worthless once they are properly marked to market. The losses are going to exceed 1 trillion dollars. Anyone who didn't see this coming is an idiot. My favorite story of this entire housing boom is when I read an article about a 14,000/yr illegal alien strawberry picker in california who qualified and purchased a $720,000 home. I wonder how Helicopter Ben Bernanke is going to handle this mess. Hyperinflation?

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No one doubts that there are going to be losses. The question is how big. To hurt the aaa tranches the assets themselves need to depreciate by orders of magnitude. I don't see that happening. Moody's, which is certainly not inclined to underestimate the problem these days, estimated this week that $460 billion of subprime, alt-a, and jumbo interest loans will default between now and 2008. Of that roughly $113 billion will be a loss to investors after recovery efforts (although that is underestimated because it doesn't account for all the derivative activity in this area). Even if recoveries are half of that, the highly rated bundled securities should not be stung too badly.
Please tell me where you get your 1 trillion dollar number. I agree that there are over a trillion dollars of mortgages are at risk of default, but excluding derivative activity, I don't how losses are going to be such a large percentage of the total loan amounts.

[DcifrThs]

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A nationwide meltdown of catastrophic proportions is going to happen. Did you mean to say marked to model instead of marked to market? All the subprime and most of the alt-A CDOs are going to end up worthless once they are properly marked to market. The losses are going to exceed 1 trillion dollars. Anyone who didn't see this coming is an idiot. My favorite story of this entire housing boom is when I read an article about a 14,000/yr illegal alien strawberry picker in california who qualified and purchased a $720,000 home. I wonder how Helicopter Ben Bernanke is going to handle this mess. Hyperinflation?

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No one doubts that there are going to be losses. The question is how big. To hurt the aaa tranches the assets themselves need to depreciate by orders of magnitude. I don't see that happening. Moody's, which is certainly not inclined to underestimate the problem these days, estimated this week that $460 billion of subprime, alt-a, and jumbo interest loans will default between now and 2008. Of that roughly $113 billion will be a loss to investors after recovery efforts (although that is underestimated because it doesn't account for all the derivative activity in this area). Even if recoveries are half of that, the highly rated bundled securities should not be stung too badly.
Please tell me where you get your 1 trillion dollar number. I agree that there are over a trillion dollars of mortgages are at risk of default, but excluding derivative activity, I don't how losses are going to be such a large percentage of the total loan amounts.

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i agree that the AAA tranche losses may be a bit overblown and, thus a good buying opportunity. i'd be a little hesitant though since the ABX index did only fall 7%... that increase in insurance costs may be warranted and correct, though markets do have a tendency to overreact upon hearing that type of news.

Barron