How complex are the algorithms used by financial institutions such as Goldman Sachs and other hedge funds in their proprietary trading so…
This is an answer to a question on Quora. It got re-posted and shared across Quora users.
Answer by Laurent Bernut:
Complexity is a form of laziness
Complexity is fragile: it works until it does notThere are two types of algos: low-latency and systematic algos.
Low-latency is the realm of HFT. Those algos can be quite intense. Read dark pools or flash boys. There are now algos gaming other algos. It is a bit like the “sperm war” in the “red queen”, a book on evolutionary psychology.
At the other end of the spectrum is systematic trading. It stems of the belief that if investment is a process, then it should be automated. Those algos are conceptually easy to understand. They are not however always easy to program.
At the end of the day, algos are a reflection of the philosophy, beliefs of those who design and code them. Those who have not mastered their craft will gladly put lipstick on a pig, by adding complexity to flawed concepts.
Those who have worked a bit harder will simplify. Simplicity is not easySorry for the philosophical answer
Love this part – “Simplicity is not easy”. Personal philosophy is based on quote:
“Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.” – Antoine de Saint-Exupery
Merci Johan,
Thank You very much for Your message. As the great Chinese philosopher Bruce Lee used to say: “the height of perfection runs into simplification”
Happy New Year