Utilizing contractual certainty to create asymmetric outcomes - Castlehedge, LLC Disclosures: castlehedgecapital.com
Dallas, Texas
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This entire business is based on standard deviation.
However, I feel like we all forget it was Harry Markowitz who introduced the statistical technology in 1955 as an applicable tool to the one and only Milton Friedman thus changing the field of finance forever...story time:
After publishing his landmark paper, "Portfolio Selection" in the Journal of Finance in March 1952, Harry moved to Santa Monica, California to work for the RAND Corporation, leaving his dissertation and his PhD uncompleted.
While at RAND, he met George Dantzig, the "father of linear programming". George was able to help Harry calculate the exact mix of stocks that provided the highest rate of return for a given level of "risk" via the IBM CPC calculator which weighed almost 2 tons and basically filled up a whole room.
3 years later, while on his way to Washington, D.C., Harry stopped in Chicago to give his formal defense of his dissertation in-person to the one and only...Milton Friedman.
Landing in Midway, Harry was full of confidence and thought not even Milton Friedman could reject his thesis since he got it down pat...oh was he in for a big surprise...
5 minutes into his defense, Milton says, "Well, Harry I've read your thesis and I don't see any mistakes in the math but...this is not a dissertation in economics and we can't give you a PhD in economics for something that's not economics"...at this point, Harry began to sweat...
For the next hour and a half, Milton Friedman would relentlessly grill Harry on this point finally culminating into Milton saying, "Harry you got a serious problem here...this isn't economics, this isn't mathematics, this isn't business administration..."
And right before Milton could finish his statement, Jacob Marschak, Harry's PhD advisor, who was up until this point silent, chimed in from behind Milton and said, "it's not literature..." LOL!!!
At this point Milton turned around and looked at Marschak and then back at Harry and said, "Harry, why don't you step outside for a moment".
5 minutes later, still sweating and waiting in the hallway, Harry sees Marschak walking towards him. Heart still palpitating, Marschak reaches out to shake Harry's hand and says...
"Congratulations Dr. Markowitz".
At this very moment, Quantitative Finance was born.
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I just learned that Myron and Fisher's paper was rejected multiple times for being "insignificant" and was only published after Gene and Miller pushed for a reread. Funny how this paper changed finance forever and is the basis to price corporate credit and all options today.
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This entire business is based on standard deviation.
However, I feel like we all forget it was Harry Markowitz who introduced the statistical technology in 1955 as an applicable tool to the one and only Milton Friedman thus changing the field of finance forever...story time:
After publishing his landmark paper, "Portfolio Selection" in the Journal of Finance in March 1952, Harry moved to Santa Monica, California to work for the RAND Corporation, leaving his dissertation and his PhD uncompleted.
While at RAND, he met George Dantzig, the "father of linear programming". George was able to help Harry calculate the exact mix of stocks that provided the highest rate of return for a given level of "risk" via the IBM CPC calculator which weighed almost 2 tons and basically filled up a whole room.
3 years later, while on his way to Washington, D.C., Harry stopped in Chicago to give his formal defense of his dissertation in-person to the one and only...Milton Friedman.
Landing in Midway, Harry was full of confidence and thought not even Milton Friedman could reject his thesis since he got it down pat...oh was he in for a big surprise...
5 minutes into his defense, Milton says, "Well, Harry I've read your thesis and I don't see any mistakes in the math but...this is not a dissertation in economics and we can't give you a PhD in economics for something that's not economics"...at this point, Harry began to sweat...
For the next hour and a half, Milton Friedman would relentlessly grill Harry on this point finally culminating into Milton saying, "Harry you got a serious problem here...this isn't economics, this isn't mathematics, this isn't business administration..."
And right before Milton could finish his statement, Jacob Marschak, Harry's PhD advisor, who was up until this point silent, chimed in from behind Milton and said, "it's not literature..." LOL!!!
At this point Milton turned around and looked at Marschak and then back at Harry and said, "Harry, why don't you step outside for a moment".
5 minutes later, still sweating and waiting in the hallway, Harry sees Marschak walking towards him. Heart still palpitating, Marschak reaches out to shake Harry's hand and says...
"Congratulations Dr. Markowitz".
At this very moment, Quantitative Finance was born.
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RT @BlacklionCTA: Glad I had dinner wish @castlehedge and didn’t watch a minute of SOTU.
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Some days I really do miss the sellside…gotta love that VoIP...
youtube.com/watch?v=zi0Ija9r…
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Castlehedge retweeted
A zero employee single manager fund runs somewhere between $500k and $1mm per year in expenses like audit, admin, legal/formation costs nowadays, so $50mm is the minimum for *you* to draw a paycheck, let alone employ a team, without eating performance fees for ~all of comp.
The economics of running hedge funds are pretty rough. Say you have the skills to make $500k in big tech or finance or something. If you charge industry standard 2%, you need to manage $25mil just for your annual fee to equal what you could make in a full-time job
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Implied Volatility Surface Morgan Stanley youtu.be/GmqhytlQqic