Tuesday, September 21, 2010

Physicist(s) and the flash crash

Flash crash -- mystery solved?

This article profiles former physicist Gregg Berman and his investigation of the flash crash of May 6. Berman works for the SEC now after a long career in finance as a quant and risk manager. Earlier I posted a job ad for his group.

I predict when the dust settles Gregg won't be the only ex-physicist appearing in the story ;-)

NYTimes: ... In investigating the crash, Mr. Berman says he finds himself in a position similar to his physics work 20 years ago, when he was collecting huge amounts of data and comparing the competing views of many laboratories on a question dividing particle physics — whether the neutrino, one of the least known and most common elementary particles, actually had mass.

Today he finds himself in familiar territory, sifting through huge amounts of messy and disjointed data, and at the same time reading blogs and e-mails from a wide range of observers, each with a theory about what happened on May 6.

Despite his formal training as a physicist, Mr. Berman is no stranger to stock markets. After academia, he spent 16 years on Wall Street, first devising algorithmic trading strategies for hedge funds, then working for RiskMetrics Group, where he created software and dispensed risk-management advice to asset managers, banks and hedge funds.

Having worked with hedge funds and high-frequency traders, Mr. Berman came to his current job a year ago with practical market knowledge and a familiarity with the world of stock trading. Several prominent market players say they found Mr. Berman’s rare combination of experiences refreshing — and reassuring.

... “Many market participants told us, ‘We’re not quite sure what happened over all, but this is what my firm saw and the actions we took,’ ” Mr. Berman said. “It was like ‘C.S.I.’ We wanted to interview everyone around.”

Mr. Berman said the level of detail gleaned from his investigation will help provide the explanation for what occurred on May 6, even if it may not delivery the simple answer that many people would like.

“This level of fact proved to be very, very telling,” he said. “We started to build up a complete picture.”

1 comment:

Albert said...


Berman has some bad things to say about Princeton physics department.

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