STREET DOGS: Black boxes can make a lot of money before blowing up
The real challenge is to ‘sniff out’ the degrading model prior to its inevitable ‘blow-up’
05 July 2021 - 18:57
From an article at the GlobalSlant:
I will never forget a conversation I had with a leading quantitative portfolio manager. He said to me that despite its obvious attributes, “black box” trading was very tricky. The algorithms may work for a while (even a very long while) and then, inexplicably, they’ll just completely “blow-up”. To him the most important component to quantitative trading was not the creation of a good model. The real challenge, for him, was to “sniff out” the degrading model prior to its inevitable “blow-up”. “Because, you know, eventually they all blow-up.” ..
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