Tag Archives: computing

Man as Chinese Room

In the previous posts in this series, we discussed how devastating Searle’s Chinese Room argument was to the premise that our brains are digital computers. He argued, quite convincingly, that mere symbol manipulation could not lead to the rich understanding that we seem to enjoy. However, I refused to be convinced, and found the so-called systems response more convincing. It was the counter-argument saying that it was the whole Chinese Room that understood the language, not merely the operator or symbol pusher in the room. Searle laughed it off, but had a serious response as well. He said, “Let me be the whole Chinese Room. Let me memorize all the symbols and the symbol manipulation rules so that I can provide Chinese responses to questions. I still don’t understand Chinese.”

Now, that raises an interesting question — if you know enough Chinese symbols, and Chinese rules to manipulate them, don’t you actually know Chinese? Of course you can imagine someone being able to handle a language correctly without understanding a word of it, but I think that is stretching the imagination a bit too far. I am reminded of the blind sight experiment where people could see without knowing it, without being consciously aware of what it was that they were seeing. Searle’s response points in the same direction — being able to speak Chinese without understanding it. What the Chinese Room is lacking is the conscious awareness of what it is doing.

To delve a bit deeper into this debate, we have to get a bit formal about Syntax and Semantics. Language has both syntax and semantics. For example, a statement like “Please read my blog posts” has the syntax originating from the grammar of the English language, symbols that are words (syntactical placeholders), letters and punctuation. On top of all that syntax, it has a content — my desire and request that you read my posts, and my background belief that you know what the symbols and the content mean. That is the semantics, the meaning of the statement.

A computer, according to Searle, can only deal with symbols and, based on symbolic manipulation, come up with syntactically correct responses. It doesn’t understand the semantic content as we do. It is incapable of complying with my request because of its lack of understanding. It is in this sense that the Chinese Room doesn’t understand Chinese. At least, that is Searle’s claim. Since computers are like Chinese Rooms, they cannot understand semantics either. But our brains can, and therefore the brain cannot be a mere computer.

When put that way, I think most people would side with Searle. But what if the computer could actually comply with the requests and commands that form the semantic content of statements? I guess even then we would probably not consider a computer fully capable of semantic comprehension, which is why if a computer actually complied with my request to read my posts, I might not find it intellectually satisfying. What we are demanding, of course, is consciousness. What more can we ask of a computer to convince us that it is conscious?

I don’t have a good answer to that. But I think you have to apply uniform standards in ascribing consciousness to entities external to you — if you believe in the existence of other minds in humans, you have to ask yourself what standards you apply in arriving at that conclusion, and ensure that you apply the same standards to computers as well. You cannot build cyclical conditions into your standards — like others have human bodies, nervous systems and an anatomy like you do so that that they have minds as well, which is what Searle did.

In my opinion, it is best to be open-minded about such questions, and important not to answer them from a position of insufficient logic.

Minds as Machine Intelligence

Prof. Searle is perhaps most famous for his proof that computing machines (or computation as defined by Alan Turing) can never be intelligent. His proof uses what is called the Chinese Room argument, which shows that mere symbol manipulation (which is what Turning’s definition of computation is, according to Searle) cannot lead to understanding and intelligence. Ergo our brains and minds could not be mere computers.

The argument goes like this — assume Searle is locked up in a room where he gets inputs corresponding to questions in Chinese. He has a set of rules to manipulate the input symbols and pick out an output symbol, much as a computer does. So he comes up with Chinese responses that fool outside judges into believing that they are communicating with a real Chinese speaker. Assume that this can be done. Now, here is the punch line — Searle doesn’t know a word of Chinese. He doesn’t know what the symbols mean. So mere rule-based symbol manipulation is not enough to guarantee intelligence, consciousness, understanding etc. Passing the Turing Test is not enough to guarantee intelligence.

One of the counter-arguements that I found most interesting is what Searle calls the systems argument. It is not Searle in the Chinese room that understands Chinese; it is the whole system including the ruleset that does. Searle laughs it off saying, “What, the room understands Chinese?!” I think the systems argument merits more that that derisive dismissal. I have two supporting arguments in favor of the systems response.

The first one is the point I made in the previous post in this series. In Problem of Other Minds, we saw that Searle’s answer to the question whether others have minds was essentially by behavior and analogy. Others behave as though they have minds (in that they cry out when we hit their thumb with a hammer) and their internal mechanisms for pain (nerves, brain, neuronal firings etc) are similar to ours. In the case of the Chinese room, it certainly behaves as though it understands Chinese, but it doesn’t have any analogs in terms of the parts or mechanisms like a Chinese speaker. Is it this break in analogy that is preventing Searle from assigning intelligence to it, despite its intelligent behavior?

The second argument takes the form of another thought experiment — I think it is called the Chinese Nation argument. Let’s say we can delegate the work of each neuron in Searle’s brain to a non-English speaking person. So when Searle hears a question in English, it is actually being handled by trillions of non-English speaking computational elements, which generate the same response as his brain would. Now, where is the English language understanding in this Chinese Nation of non-English speaking people acting as neurons? I think one would have to say that it is the whole “nation” that understands English. Or would Searle laugh it off saying, “What, the nation understands English?!”

Well, if the Chinese nation could understand English, I guess the Chinese room could understand Chinese as well. Computing with mere symbol manipulation (which is what the people in the nation are doing) can and does lead to intelligence and understanding. So our brains could really be computers, and minds software manipulating symbols. Ergo Searle is wrong.

Look, I used Prof. Searle’s arguments and my counter arguments in this series as a sort of dialog for dramatic effect. The fact of the matter is, Prof. Searle is a world-renowned philosopher with impressive credentials while I am a sporadic blogger — a drive-by philosopher at best. I guess I am apologizing here to Prof. Searle and his students if they find my posts and comments offensive. It was not intended; only an interesting read was intended.

Problem of Other Minds

How do you know other people have minds as you do? This may sound like a silly question, but if you allow yourself to think about it, you will realize that you have no logical reason to believe in the existence of other minds, which is why it is an unsolved problem in philosophythe Problem of Other Minds. To illustrateI was working on that Ikea project the other day, and was hammering in that weird two-headed nail-screw-stub thingie. I missed it completely and hit my thumb. I felt the excruciating pain, meaning my mind felt it and I cried out. I know I have a mind because I felt the pain. Now, let’s say I see another bozo hitting his thumb and crying out. I feel no pain; my mind feels nothing (except a bit of empathy on a good day). What positive logical basis do I have to think that the behavior (crying) is caused by pain felt by a mind?

Mind you, I am not suggesting that others do not have minds or consciousness — not yet, at least. I am merely pointing out that there is no logical basis to believe that they do. Logic certainly is not the only basis for belief. Faith is another. Intuition, analogy, mass delusion, indoctrination, peer pressure, instinct etc. are all basis for beliefs both true and false. I believe that others have minds; otherwise I wouldn’t bother writing these blog posts. But I am keenly aware that I have no logical justification for this particular belief.

The thing about this problem of other minds is that it is profoundly asymmetric. If I believe that you don’t have a mind, it is not an issue for you — you know that I am wrong the moment you hear it because you know that you have a mind (assuming, of course, that you do). But I do have a serious issue — there is no way for me to attack my belief in the non-existence of your mind. You could tell me, of course, but then I would think, “Yeah, that is exactly what a mindless robot would be programmed to say!”

I was listening to a series of lectures on the philosophy of mind by Prof. John Searle. He “solves” the problem of other minds by analogy. We know that we have the same anatomical and neurophysical wirings in addition to analogous behavior. So we can “convince” ourselves that we all have minds. It is a good argument as far as it goes. What bothers me about it is its complement — what it implies about minds in things that are wired differently, like snakes and lizards and fish and slugs and ants and bacteria and viruses. And, of course, machines.

Could machines have minds? The answer to this is rather trivial — of course they can. We are biological machines, and we have minds (assuming, again, that you guys do). Could computers have minds? Or, more pointedly, could our brains be computers, and minds be software running on it? That is fodder for the next post.

Brains and Computers

We have a perfect parallel between brains and computers. We can easily think of the brain as the hardware and mind or consciousness as the software or the operating system. We would be wrong, according to many philosophers, but I still think of it that way. Let me outline the compelling similarities (according to me) before getting into the philosophical difficulties involved.

A lot of what we know of the workings of the brain comes from lesion studies. We know, for instances, that features like color vision, face and object recognition, motion detection, language production and understanding are all controlled by specialized areas of the brain. We know this by studying people who have suffered localized brain damage. These functional features of the brain are remarkably similar to computer hardware units specialized in graphics, sound, video capture etc.

The similarity is even more striking when we consider that the brain can compensate for the damage to a specialized area by what looks like software simulation. For instance, the patient who lost the ability to detect motion (a condition normal people would have a hard time appreciating or identifying with) could still infer that an object was in motion by comparing successive snapshots of it in her mind. The patient with no ability to tell faces apart could, at times, deduce that the person walking toward him at a pre-arranged spot at the right time was probably his wife. Such instances give us the following attractive picture of the brain.
BrainComputer hardware
ConsciousnessOperating System
Mental functionsPrograms
It looks like a logical and compelling picture to me.

This seductive picture, however, is far too simplistic at best; or utterly wrong at worst. The basic, philosophical problem with it is that the brain itself is a representation drawn on the canvas of consciousness and the mind (which are again cognitive constructs). This abysmal infinite regression is impossible to crawl out of. But even when we ignore this philosophical hurdle, and ask ourselves whether brains could be computers, we have big problems. What exactly are we asking? Could our brains be computer hardware and minds be software running on them? Before asking such questions, we have to ask parallel questions: Could computers have consciousness and intelligence? Could they have minds? If they had minds, how would we know?

Even more fundamentally, how do you know whether other people have minds? This is the so-called Problem of Other Minds, which we will discuss in the next post before proceeding to consider computing and consciousness.

Where to Go from Here?

We started this long series with a pitch for my book, Principles of Quantitative Development. This series, and the associated eBook, is an expanded version of the non-technical introductory chapters of the book — what are the things we need to keep in mind while designing a trading platform? Why is it important to know the big picture of finance and banking? Hopefully, these posts have given you a taste of it here. If you would keep a copy of the series handy, you can purchase and download the beautifully crafted eBook version.

Further steps

We went through the structure of the bank from the exotic and structured trading perspective. We talked about the various offices (Vorderbüro,,en,Middle Office und Back Office,,en,und wies auf die Karrieremöglichkeiten für quantitative Fachkräfte innerhalb,,en,Die Organisationsstruktur der Bank ist der Apparat, der den dynamischen Lebenszyklus von Trades verarbeitet,,en,Wenn die Struktur der Bank der räumlichen Organisation entspricht,,en,Der Lebenszyklus des Handels ist die zeitliche Variation,,en,ihre Beziehung ist wie die der Schienen und der Züge,,en,Wir haben ziemlich viel Zeit mit dem Fluss der Trades zwischen dem Front-Office- und dem Middle-Office-Team verbracht,,en,wie die Trades genehmigt werden,,en,verarbeitet,,en,überwacht,,en,erledigt und verwaltet,,en,Jedes dieser Teams hat seine eigene Perspektive oder sein eigenes Arbeitsparadigma, mit dessen Hilfe sie ihre Aufgaben effizient ausführen können,,en,Handelsperspektiven waren das letzte wichtige Thema, das wir angesprochen haben,,en,Wie wir gesehen haben,,en, Middle Office and Back Office) and pointed out the career opportunities for quantitative professionals within. The organizational structure of the bank is the apparatus that processes the dynamic lifecycle of trades.

If the structure of the bank is akin to the spatial organization, the lifecycle of the trade is the temporal variation; their relation is like that of the rails and the trains. We spent quite a bit of time on the flow of the trades between the front office and middle office teams, how the trades get approved, processed, monitored, settled and managed. Each of these teams has their own perspective or work paradigm that helps them carry out their tasks efficiently.

Trade Perspectives was the last major topic we touched upon. As we saw, Diese Perspektiven basieren auf der Art und Weise, wie die verschiedenen Teams der Bank ihre Aufgaben erfüllen,,en,Sie bilden den Hintergrund des Jargons,,en,und sind wichtig, wenn wir ein umfassendes Verständnis für die Funktionsweise einer Bank entwickeln wollen,,en,Am meisten wie viele,,ca,vor allem auf Junior-Ebenen,,en,verachten das große Ganze,,en,Sie betrachten es als Ablenkung von ihrer eigentlichen Arbeit, stochastischen Kalkül mit C zu verbinden,,en,Aber zu einem Händler,,en,Das beste Modell der Welt ist wertlos, wenn es nicht eingesetzt werden kann,,en,Wenn wir unsere Enge wechseln,,en,wenn auch effektiv,,en,Konzentrieren Sie sich auf die vorliegende Arbeit, um unsere Rolle und unseren Wert in der Organisation zu verstehen,,en,Wir werden die möglichen Fehlerquellen der Systeme und Prozesse sowie die Möglichkeiten sehen, etwas zu verändern,,en. They form the backdrop of the jargon, and are important if we are to develop a big-picture understanding of the way a bank works. Most quants, especially at junior levels, despise the big picture. They think of it as a distraction from their real work of marrying stochastic calculus to C . But to a trader, the best model in the world is worthless unless it can be deployed. When we change our narrow, albeit effective, focus on the work at hand to an understanding of our role and value in the organization, we will see the possible points of failure of the systems and processes as well as the opportunities to make a difference. Wir sind dann besser in der Lage, unsere Karriere voll auszuschöpfen,,en,Computing,,en,Geld,,en,quantitative Finanzierung,,en,Wilmott,,en,Andere Handelsperspektiven,,en,In den vorherigen Beiträgen,,en,Wir haben gesehen, wie verschiedene Teams die Handelsaktivität in ihrem eigenen Arbeitsparadigma sehen,,en,Die in der Bank am weitesten verbreitete Perspektive ist nach wie vor handelsorientiert,,en,In dieser Ansicht,,en,Trades bilden die primären Objekte,,en,Deshalb verfolgen alle herkömmlichen Handelssysteme sie,,en,Stellen Sie eine Reihe von Trades zusammen,,en,Sie erhalten ein Portfolio,,en,Stellen Sie einige Portfolios zusammen,,en,du hast ein Buch,,en,Der gesamte globale Markt ist lediglich eine Sammlung von Büchern,,en,Dieses Paradigma hat gut funktioniert und ist wahrscheinlich der beste Kompromiss zwischen verschiedenen möglichen Ansichten,,en,Die handelsorientierte Perspektive,,en,jedoch,,en,ist nur ein Kompromiss,,en,Die Aktivitäten des Handelsraums können aus verschiedenen Blickwinkeln betrachtet werden,,en.

Other Trade Perspectives

In the previous posts, we saw how various teams view the trading activity in their own work paradigm. The perspective that is most common in the bank is still trade-centric. In this view, trades form the primary objects, which is why all conventional trading systems keep track of them. Put bunch of trades together, you get a portfolio. Put a few portfolios together, you have a book. The whole Global Markets is merely a collection of books. This paradigm has worked well and is probably the best compromise between different possible views. The trade-centric perspective, however, is only a compromise. The activities of the trading floor can be viewed from different angles. Jede Perspektive hat ihre Rolle in der Arbeitsweise der Bank,,en,Andere Perspektiven,,en,Aus Sicht der Händler,,en,Die Handelsaktivität ist auf die Anlageklasse ausgerichtet,,en,In der Regel mit einem bestimmten Trading Desk verbunden, der auf Anlageklassen basiert,,en,Ihre Lieblingsansicht erstreckt sich über Modelle und Produkte,,en,An Händler,,en,Alle Produkte und Modelle sind lediglich Werkzeuge, um Gewinn zu erzielen,,en,Die IT-Abteilung betrachtet die Handelswelt aus einer völlig anderen Perspektive,,en,Ihre Ansicht ist systemzentriert,,en,Dabei handelt es sich bei demselben Produkt, das dasselbe Modell verwendet und in zwei verschiedenen Systemen vorkommt, im Grunde genommen um zwei völlig unterschiedliche Bestien,,en,Diese Ansicht wird von den Händlern nicht besonders geschätzt,,en,wie viele oder wie viele Entwickler,,ca,Eine Ansicht, die die gesamte Bank schätzt, ist die Ansicht der Geschäftsleitung,,en,das ist eng auf das Endergebnis fokussiert,,en.

Other perspectives

From the viewpoint of traders, the trading activity looks asset-class centric. Typically associated with a particular trading desks based on asset classes, their favorite view cuts across models and products. To traders, all products and models are merely tools to make profit.

IT department views the trading world from a completely different perspective. Theirs is a system-centric view, where the same product using the same model appearing in two different systems is basically two completely different beasts. This view is not particularly appreciated by traders, quants or quant developers.

One view that the whole bank appreciates is the view of the senior management, which is narrowly focussed on the bottom line. Die großen Chefs können Dinge priorisieren,,en,ob Produkte,,en,Anlageklassen oder -systeme,,en,in Bezug auf das Geld, das sie den Aktionären bringen,,en,Modelle und Trades sind in der Regel von oben nicht sichtbar,,en,es sei denn,,en,Schurkenhändler verlieren viel Geld für ein bestimmtes Produkt oder durch die Verwendung eines bestimmten Modells,,en,Wenn der Handel das Marktrisikomanagement erreicht,,en,Die Perspektive ändert sich geringfügig von einer Sicht auf Handelsebene zu einer Ansicht auf Portfolio- oder Buchebene,,en,Obwohl mathematisch trivial,,en,Nach alldem,,en,Der Unterschied ist nur eine Frage der Aggregation,,en,Diese Änderung hat Auswirkungen auf das Systemdesign,,en,Die Handelsplattform muss eine robuste hierarchische Portfoliostruktur beibehalten, damit verschiedene Würfel und Schnitte, wie sie in späteren Phasen des Handelslebenszyklus erforderlich sind, auf natürliche Weise gehandhabt werden können,,en (whether products, asset classes or systems) in terms of the money they bring to the shareholders. Models and trades are typically not visible from their view from the top — unless, of course, rogue traders lose a lot of money on a particular product or by using a particular model.

When the trade reaches the Market Risk Management, there is a subtle change in the perspective from a trade-level view to a portfolio or book level view. Though mathematically trivial (after all, the difference is only a matter of aggregation), this change has implications in the system design. The trading platform has to maintain a robust hierarchical portfolio structure so that various dicing and slicing as required in the later stages of the trade lifecycle can be handled with natural ease.

Wenn es um Finanzen und ihre Vorstellungen von Kostenstellen geht,,en,Der Handel ist so ziemlich außerhalb des Buchungssystems,,en,Immer noch,,en,Sie verwalten Trading Desks und Kostenstellen für Anlageklassen,,en,Jede von uns entworfene Handelsplattform muss angemessene Hooks im System bereitstellen, um auch auf ihre spezifischen Anforderungen zu reagieren,,en,Eng verwandt mit dieser Sichtweise ist die Perspektive der Personalabteilung,,en,die Anreize auf der Grundlage der Leistung entscheiden, die anhand des Endergebnisses auf Kostenstellen- oder Teamebene gemessen wird,,en,Mittleres Büro,,en,Die Perspektive des Middle Office-Teams ist interessant,,en,Ihr Arbeitsparadigma ist das von Warteschlangen, die in einem First-In laufen,,en,First-Out-Modus,,en,Wie im Bild unten gezeigt,,en,Sie betrachten Trades als Teil von Validierungs- und Verifizierungswarteschlangen,,en,Wenn ein neuer Trade gebucht wird,,en, the trade is pretty much out of the booking system. Still, they manage trading desks and asset classes cost centers. Any trading platform we design has to provide adequate hooks in the system to respond to their specific requirements as well. Closely related to this view is the perspective of Human Resources, who decide incentives based on performance measured in terms of the bottom lines at cost-center or team levels.

Middle Office

The perspective employed by the Middle Office team is an interesting one. Their work paradigm is that of queues running in a first-in, first-out mode. As shown in the picture below, they think of trades as being part of validation and verification queues. When a new trade is booked, Es wird von einem Ende in die Validierungswarteschlange verschoben,,en,Die Mitarbeiter des Middle Office greifen die Warteschlange am anderen Ende an,,en,Akzeptieren oder Ablehnen jedes Eintrags,,en,Diejenigen, die als gut eingestuft werden, werden in eine zweite Überprüfungswarteschlange gestellt,,en,Die schlechten werden zur Änderung der Handelseinträge oder möglichen Stornierungen an die Handelsschalter zurückgeschickt,,en,Middle Office-Perspektive,,en,Ein ähnliches Paradigma wird bei der Behandlung von Marktoperationen wie der Festsetzung von Zinssätzen angewendet,,en,Cashflow generieren etc.,,en,Marktoperationen haben ihre eigenen zweistufigen Warteschlangen,,en,Beachten Sie, dass der gesamte Ablauf durch die Handelsplattform erleichtert werden soll,,en,die die Fähigkeit haben sollte, verschiedene Ansichten zu rendern,,en,Es bietet dem Personal des mittleren Büros eine warteschlangenbasierte Ansicht der Daten,,en,und eine berichtsbasierte Ansicht für das Market Risk Management-Team,,en,zum Beispiel,,en. The Middle Office staff attacks the queue from the other end, accepting or rejecting each entry. The ones deemed good get into a second verification queue. The bad ones are returned to the trading desks for modifications in the trade entries or possible cancellations.

Middle Office perspective

A similar paradigm is employed in dealing with market operations such as fixing rates, generating cash flow etc. Market operations have their own two-stage queues. Note that the whole flow is to be facilitated by the trading platform, which should have the capability to render different views. It presents a queue-based view of the data to the middle office staff, and a report-based view to the Market Risk Management team, for instance, oder eine handelsorientierte Sicht auf die meisten anderen Teams,,en,Für jedes Team ist es wichtig, ein grundlegendes Verständnis und einen gesunden Respekt für das Arbeitsparadigma des anderen zu haben, damit sie effizient miteinander kommunizieren können,,en,Es ist nicht gut, die Handelsperspektiven des Restes der Bank zu ignorieren,,en,Nach alldem,,en,Solche Handelsperspektiven entwickelten sich natürlich aus jahrelangen Versuchen und Irrtümern,,en,Quant Entwickler,,en,Im Gegensatz zu wie vielen,,ca,Quantitative Entwickler sind produktorientierter,,en,Ihre Aufgabe ist es, die Preismodelle zu übernehmen,,en,die Ausgabe des quantitativen Aufwands,,en,und machen sie einsetzbar und für die Händler zugänglich,,en,Verkaufsteams und das mittlere und hintere Büro,,en,Ihre primäre Arbeitseinheit ist ein Produkt, denn wenn sich die Produktdefinition ändert,,en,unabhängig davon, ob ein neues oder ein vorhandenes Preismodell verwendet wird,,en. It is important to each team to have a basic grasp and healthy respect for the work paradigm of the other so that they can communicate efficiently with each other. It is no good ignoring the trade perspectives of the rest of the bank. After all, such trade perspectives evolved naturally out of years and years of trial and error.

Quant Developers

Unlike quants, quantitative developers are more product-centric. Their job is to take the pricing models (the output of the quant effort) and make them deployable and accessible to the traders, sales teams and the middle and back offices. Their primary unit of work is a product because when the product definition changes, regardless of whether it uses a new or an existing pricing model, Sie müssen es in das System integrieren,,en,Auch wenn es sich lediglich um eine Produktvariante handelt,,en,Sie müssen die gesamte Infrastruktur implementieren und sich um die Genehmigungsprozesse für die nachgelagerte Abwicklung kümmern,,en,Deshalb,,en,Das Arbeitsparadigma, das für einen quantitativen Entwickler am sinnvollsten ist, ist produktorientiert,,en,Quant Entwicklerperspektive,,en,Im Vergleich zu den Quants,,en,Die quantitativen Entwickler sind näher an den täglichen Aktivitäten im Front Office und Middle Office,,en,Sie sehen die Trades,,en,identifiziert durch eindeutige IDs,,en,als Instanziierungen von Produkten,,en,Einmal gebucht,,en,Sie landen in der Handelsplattformdatenbank als unterschiedliche Objekte mit Attributen, die in Handelseingaben definiert sind,,en,Neben Handelsinput,,en,Sie verwenden Marktdaten-Feeds, um ein Produkt in Form eines Handels zu bewerten,,en. Even if it is merely a product variant, they have to implement all the infrastructure and take care of the approval processes for its downstream handling. For this reason, the work paradigm that makes most sense to a quantitative developer is product-centric.

Quant developer perspective

Compared to the quants, the quantitative developers are closer to the day-to-day activities on Front Office and Middle Office. They view the trades (identified by unique IDs) as instantiations of products. Once booked, they end up in the trading platform database as distinct objects with attributes defined in trade inputs. In addition to trade input, they use market data feeds to price a product in the form of a trade. Die Handelsplattform verfügt über eine Preisschnittstelle, die Handelsinformationen und Marktdaten kombiniert,,en,Es läuft auch im sogenannten Batch-Modus,,en,regelmäßig zu einer bestimmten Tageszeit, um die Preise und Empfindlichkeiten aller Geschäfte zu berechnen,,en,Da es die Handelsplattform ist, die den Batch-Job ausführt,,en,Die quantitativen Entwickler können sich um die zugehörigen Ressourcen wie die Grid-Computing-Plattformen kümmern,,en,Marktdaten-Feeds,,en,Handelsdatenbanken usw.,,en,Insofern,,en,Ihre produktorientierte Perspektive kann sich in eine handelszentrierte Sichtweise verwandeln,,en,Wie viele,,ca,August,,en,Wenn Sie ein Quant sind,,en,Sie sind Mathematiker mit einem fortgeschrittenen Abschluss in Mathematik oder Physik,,en,Ihre Arbeit basiert sowohl auf akademischer als auch auf professioneller Forschung,,en,Peer-Review-Veröffentlichungen,,en,Sie nehmen Ihre Eingaben von ihnen,,en. It also runs in what they call batch mode — regularly at a given time of the day to compute prices and sensitivities of all trades. Since it is the trading platform that performs the batch job, the quantitative developers may take care of the associated resources like the grid computing platforms, market data feeds, trade databases etc. In this respect, their product-centric perspective may get diffused into a trade-centric view.


If you are a quant, you are a mathematician with an advanced degree in mathematics or physics. Your work is based on both academic research and professional, peer-reviewed publications. You take your inputs from them, Wenden Sie Ihre eigene beeindruckende Intelligenz an, um ein stochastisches Preismodell zu entwickeln, von dem Sie glauben, dass es für eine Produktklasse außergewöhnlich gut funktioniert,,en,Sie benötigen auch die Details der Produkte,,en,Ihre Ausgabe ist,,en,ein eigenes Preismodell,,en,oder eine Implementierung eines Preismodells aus der Literatur,,en,Dies ist Ihre primäre Arbeitseinheit,,en,Wie für die Perspektive,,fr,Um dieses Preismodell nutzen zu können,,en,es muss validiert werden,,en,Anschließend wird eine Reihe von Produkten unter Verwendung des Preismodells definiert und zur Genehmigung eingereicht,,en,Einmal genehmigt,,en,mit Hilfe von Handelsinputs und Marktdaten,,en,Jedes der Produkte kann zum Preis angeboten und auf der Handelsplattform gebucht werden,,en,Solche Aktivitäten liegen jedoch außerhalb des Interessenbereichs und des Einflussbereichs des Quant,,en,Zu ihnen,,en. You will also need the details of the products. Your output is, of course, a pricing model of your own, or an implementation of a pricing model from the literature. This is your primary work unit.

Quant perspective

In order to make use of this pricing model, it will have to be validated. Then a set of products using the pricing model will be defined and submitted for approval. Once approved, with the help of trade inputs and market data, each of the products can be priced and booked into the trading platform. But such activities are outside the sphere of interest and influence of the quant. To them, Wie ein Produkt in einen Handel instanziiert wird, ist ziemlich irrelevant und trivial,,en,Es geht lediglich darum, die Handels- und Marktinputs für das Preismodell festzulegen,,en,Auch wie verschiedene Produkte abgeleitet werden, ist mechanisch,,en,und all die,,en,Real,,en,Die Arbeit erfolgt im Preismodell,,en,Diese Perspektive,,en,obwohl genau und funktional für eine quant,,en,ist ziemlich weit von der Sicht des Restes der Bank entfernt,,en,Aus diesem Grund haben Quants manchmal den zweifelhaften Ruf, nicht mit der Branche in Kontakt zu sein,,en,Es geht nicht so sehr darum, dass sie ihre Perspektive ändern müssen,,en,Sie sollten sich jedoch darüber im Klaren sein, dass andere Geschäftsbereiche, mit denen sie interagieren, andere gleichermaßen gültige Perspektiven vertreten,,en,und bemühen Sie sich, sie zu kennen,,en,Handelsperspektiven,,en,Der letzte Abschnitt dieser Beitragsreihe befasst sich mit Handelsperspektiven,,en. It is merely a question of specifying the trade and market inputs to the pricing model. Even how various products are derived is mechanical, and all the “real” work is done in the pricing model.

This perspective, though accurate and functional for a quant, is pretty far removed from the view of the rest of the bank, which is why quants sometimes have the dubious reputation of being out of touch with the industry. The point is not so much that they have to change their perspective, but they should appreciate that there are other equally valid perspectives held by other business units they interact with, and make an effort to know them.

Trade Perspectives

The last section of this post series is on trade perspectives. Eigentlich,,en,Unsere früheren Abschnitte über die statische Struktur der Bank und die zeitliche Entwicklung des Handels waren in Vorbereitung auf diesen letzten Abschnitt,,en,In den nächsten Beiträgen,,en,Wir werden sehen, wie die Quants,,en,quantitative Entwickler und die Middle Office-Profis,,en,und der Rest,,en,siehe Handel und Handelsaktivität,,en,Ihre Ansichten sind wichtig und müssen in der Designphilosophie jeder Handelsplattform berücksichtigt werden,,en,Woher kommen diese Perspektiven und warum müssen wir sie kennen,,en,Die Handelsperspektiven basieren auf dem für jeden Geschäftsbereich spezifischen Arbeitsparadigma,,en,Aufgrund dessen, auf welchen Aspekt der Handelsaktivität sich eine Gruppe konzentriert,,en,Sie entwickeln ein Paradigma,,en,oder ein mentales Modell,,en,das funktioniert am besten für sie,,en,Um zu verstehen,,en, our earlier sections on the static structure of the bank and the temporal evolution of the trade have been in preparation to this last section. In the next couple of posts, we will see how the quants, quantitative developers and the middle office professionals (and the rest) see trades and trading activity. Their views are important and need to be accommodated in the design philosophy of any trading platform.

Where do these perspectives come from and why do we need to know about them? Trade perspectives are based on the work paradigm specific to each business unit. Because of what aspect of the trading activity a group focuses on, they evolve a paradigm, or a mental model, that works best for them.

In order to understand, Lassen Sie uns einen Blick darauf werfen, wie wir mit einem modernen Personal Computer arbeiten,,en,Das Paradigma, das uns präsentiert wird, ist ein Schreibtisch und ein Aktenschrank,,en,Wir haben also einen Desktop,,en,Ordner und Dateien,,en,Sie sind für uns jetzt so natürlich geworden, dass wir uns keine andere Art der Interaktion mit einem Computer vorstellen können,,en,Das Internet,,en,andererseits,,en,basiert auf einem Paradigma von etwas, das über uns schwebt,,en,Deshalb wir,,en,Nieder,,en,lade Sachen davon und,,en,oben,,en,lade Sachen hinein,,en,Aber die Programmierer und Architekten, die solche Paradigmen entwickeln, arbeiten oft auch mit anderen und weniger bekannten Paradigmen,,en,Zum Beispiel haben wir Ports und Sockets und Streams und so weiter,,en,Wenn wir das Arbeitsparadigma nicht schätzen,,en,Wir werden den Jargon, der damit einhergeht, geheimnisvoll und unverständlich finden,,en. The paradigm we are presented with is one of a desk and a filing cabinet. So we have a desktop, folders and files. They have become so natural for us now that we cannot imagine another way of interacting with a computer at all. The Internet, on the other hand, is built on a paradigm of something that hovers over us, which is why we “down”-load stuff from it and “up”-load stuff into it. But the programmers and architects who develop such paradigms often do work with different and less known paradigms as well; for instance we have ports and sockets and streams and so on.

If we do not appreciate the work paradigm, we will find the jargon that comes with it mysterious and incomprehensible. Dies gilt insbesondere dann, wenn wir an Projekten arbeiten möchten, die mehrere Geschäftsbereiche mit unterschiedlichen Paradigmen abdecken,,en,Handelsperspektiven,,en,Um es anhand eines Beispiels aus unserer Handelswelt weiter zu veranschaulichen,,en,Schauen wir uns an, wie wir einen Trade identifizieren,,en,Die Quants kümmern sich wirklich nicht um die Handelsidentifikationsnummer,,en,für Sie,,en,Es ist das Preismodell, das die Grundeinheit ist, mit der sie arbeiten,,en,Der quantitative Entwickler,,en,möchte, dass die Kennung pro Trade etwas Einzigartiges ist,,en,Ein Strukturierer möchte eine identifizierende Referenz für den Handel mit möglichen Unter-IDs für die einzelnen Untergeschäfte haben, aus denen eine Struktur besteht,,en,Diese Anforderung ist zwar einfach zu implementieren,,en.

Trade perspectives

To illustrate it further with an example from our trading world, let’s look at how we identify a trade. The quants really do not care about the trade identification number; for them, it is the pricing model that is the basic unit that they work with. The quantitative developer, on the other hand, would like the identifier to be something unique per trade. A structurer would like to have one identifying reference for the trade with possible sub IDs for the individual sub trades that make up a structure. While this requirement is easy enough to implement, Die Softwarearchitektur muss auch die Anforderungen für Handelsstornierungen und -änderungen von Front Office und Middle Office erfüllen,,en,Was passiert, wenn eine Struktur geändert oder abgebrochen wird?,,en,Wie finden und behandeln wir alle damit verbundenen Trades?,,en,Dieses Problem erfordert fast immer eine Link-ID in der Datenbank,,en,Änderungen der Handelsnummer bei einem Live-Deal stellen auch das Dokumentations- und Betriebspersonal vor Probleme,,en,wer könnte eine andere unveränderliche externe Referenznummer verlangen, die jedem Handel beigefügt ist,,en,Die Prüfung erfordert Integrität und Unauslöschlichkeit in Bezug auf alles,,en,anspruchsvolle Duplizierung von Datenbankdatensätzen,,en,Wie wir sehen können,,en. What happens when a structure is modified or canceled? How do we find and deal withall the related trades? This problem will almost invariably ends up requiring a link ID in the database. Trade number amendments on a live deal create problem for documentation and operations staff as well, who might demand another immutable external reference number attached each trade. Audit will require integrity and indelibility on everything, demanding database record duplication. As we can see, Die Perspektiven und Arbeitsparadigmen der einzelnen Geschäftsbereiche führen zu häufig widersprüchlichen Anforderungen an die Programmgestaltung auf einer fundamentalen Ebene,,en,Aus diesem Grund werden wir uns die Handelsperspektiven in den folgenden Beiträgen dieser Reihe genauer ansehen,,en,Zusammenfassung,,en,Das Leben eines Handels,,en,Damit sind wir am Ende unserer Diskussion über den Handelslebenszyklus angelangt,,en,Wir sprachen über Aktivitäten vor dem Handel wie die quantitative Arbeit am Preismodell,,en,und seine Validierung durch ein unabhängiges Team,,en,Pro Handel,,en,Wir haben die Verkaufs- und Bonitätsprüfungsaktivitäten,,en,Sobald ein Handel eingeleitet wird,,en,Es durchläuft die ersten Validierungsarbeiten von Middle Office,,en,gefolgt von einer regelmäßigen Bearbeitung durch eine große Anzahl von Teams,,en. It is for this reason that we will take close look at the trade perspectives in the following posts of this series.