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I think some of you know the famous billionaire mathematician James Simons. Somewhat as Warren Buffet, this guy cracked the Wall Street with a mathematical model (essentially most statistic and a bit of probability). It could take a lot of time, but I'd like to understand by myself how he constructs his model or how to reproduce a similar model. It follows that none idea came up so far, and I wish someone would unblock me at this level.

Questions : Could anyone be able to give me a path, ideas (Markov models, ...) how could I obtain a starting idea? In other words, does anyone have the intuition of the mathematical theory he uses to this algorithm?

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In 1983 he was using Hidden Markov Models. Now he employs 100+ PhDs, therefore I expect he will have 50+ strategies using 200+ predictors. And set up as a production line, from the teams importing and cleaning data, down to execution of trades. Every step fine tuned and optimized. There is nothing like 'the algorithm' anymore.

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    $\begingroup$ and don't forget the x+ tax lawyers: bloomberg.com/politics/articles/2015-07-08/… $\endgroup$ – g g Sep 9 '16 at 9:40
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    $\begingroup$ They employed Bauma-Welch algo in the past. Now they use algos that produces a small edge but since they make a lot of trades they are able to extract it. Also the apply a large leverage via some sort of specific option contracts. All this info is from the court filings. I saw only one interview where Simons mentioned that they used something similar to momentum strategy in the past, the fund is very secretive, so you will not find any info about their strategies. They have an army of the best and brightest, so I would assume there is more than one algo. $\endgroup$ – Artem Korol Sep 9 '16 at 14:59

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