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comment Strategy of Renaissance Technologies Medallion fund: Holy Grail or next Madoff?
It's like watching the best painter or sculptor in world...or a martial artist...or a musician. Understanding the general nature of the methods is a lot different than really understanding the art. Genius is in the artful application of [relatively] simple methods ... of course, getting lucky doesn't hurt, except in what it means for overconfidence -- so it's more important to work on capital preservation and the margin of safety.
comment What concepts are the most dangerous ones in quantitative finance work?
Yes ... the estimate that is redone every day is based upon an estimate of stock price drift constant and a stock price volatility constant. Black-Scholes estimates might still be quite useful, but should be taken with a grain of salt if new information was available that indicated stock price drift or volatility were going to change over time (e.g. expiration of a significant patents plus failure of replacement next generation patents; new election showing relevance of significant political pressure for change in government regulation affecting a company where rules were not yet written).
comment What concepts are the most dangerous ones in quantitative finance work?
Black-Scholes derivation of the option pricing formula [per their original paper in JPE, v81] uses the assumptions of constant drift in stock price and volatility. In practice, everyone uses the freshest, most current, most recent estimates of drift and volatility every time that they use Black-Scholes ...that estimate is a constant, not a function of something ... the estimates are updated and the pricing formula gives a new answer ... but the formula's derivation is based upon drift and volatilty being constant over time, not varying with stock prices, stock price changes or anything else.