I'm sure everyone interested in automated trading knows of the hedge fund D.E. Shaw. Here's a recent article about their history and operations from Institutional Investor's Alpha magazine.
This is a review of Nerds on Wall Street: Math, Machines and Wired Markets
UPDATE: A website has been put up with more info on the book, nerdsonwallstreet.com
I got a pre-release copy from Dave Leinweber, the author, who I know through Berkeley's Center for Innovative Financial Technology (CIFT).
The three parts:
1) the history of financial technology
2) alpha generation ideas
3) what quants can do about the financial crisis
The first part is hilarious. One of the many pictures is of a past president of the CME banging on a gong with a giant salami.
It's a really irreverant look at Wall Street from the start- "In 1792, the New York Stock Exchange was a bunch of guys standing around a buttonwood tree at 68 Wall Street shouting at each other on days when it didn't rain or snow. We like our markets to be liquid, efficient, resilient, and robust. But this is hard when all the participants have to crowd around a tree and hope for good weather. So in 1794, we see the first big technological solution: the roof. ..."
Dave was one of the fathers of AI-based trading so the second part "Alpha as Life" really stoked my imagination. I was reading along with a pencil and paper to look for typos in the pre-release copy but I ended up writing down a new multi-factor trading strategy for small cap stocks along the way. The book is especially great for text-based strategies. It's amazing how many details he shares about old trading software companies he founded which were vendors of billion-dollar funds.
The book was fascinating because of the author's insider status over an already long and prolific career. He's come into contact with so many famous personalities in the trading world and he has a great way of characterizing people, as, well, people. It's almost 400 pages but I had no trouble reading it in a day.
Check out its reviews too- the first is by David Shaw (founder of D.E. Shaw). Here's the book jacket, with the table of contents and other reviews.
Please leave a comment or question about anything. I'm a little worried I scared everyone away with the past three notes on the Dirichlet Process.
Click on the text to see it full size (I had to copy and paste screenshots to keep the formulas). Here's parts 1, 2, and 3 in pdf format, which may be easier to read.
Be sure to read Part 1: Simplex and Part 2: Dirichlet Distribution first. Even if you are familiar with those topics, it sets up the example.
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