Money & Speed: Inside the Black Box

As a follow-up to February's video post about quants, here's a related documentary from VPRO that highlights the Flash Crash of May 6, 2010.

I vividly remember that Thursday evening when, as a risk management intern on a London trading floor, I witnessed the stocks of the world's largest corporations fall 10% and more in a matter of minutes. Markets had already been down 3-4% that day in the light of continued heavy protests in Athens. The atmosphere was eerie to say the least. On the day before, a group of angry demonstrators had set fire to a local bank, killing three employees who could not vacate the building in time. Every time the news channels resumed their live broadcasts of the violent protests equity indices and the euro dipped further. Starting at 1 p.m. New York time (6 p.m. in London) the prices of US equities began to fall sharply, triggering the first Liquidity Replenishment Points, i.e. circuit breakers, for several NYSE-listed stocks, and the chaos quickly ensued from there.

It is still not understood what caused the Flash Crash exactly, but an individual trader, Navinder Singh Sarao, who operated out of his parents' house in a poor part of London may have played a role (according to US authorities, anyway). He is currently facing trial in America after having been extradited by his home country.

Quants: The Alchemists of Wall Street

The VPRO Backlight documentary Quants: The Alchemists of Wall Street provides a casual insight into the work of quantitative traders and researchers, "quants" for short. It features Paul Wilmott, a quantitative finance researcher and consultant, and Emanuel Derman, author of My Life as a Quant and professor in financial engineering at Columbia University, amongst others.