November 5, 2012 |
One sigma daily, two sigma occasionally, three sigma rarely, six sigma never.
High sharpe always. The Professor smiled to himself. He looked at the drawdown, sortino. Beautiful.
Months of work. Days away. He flicked off the monitor, stood up, letting all the stored aches shoot up his hamstrings, into his back.
He glanced at the clock. 1.05. Traipsing across the floor, he pulled off his shirt, rolled onto the bed and closed his eyes. Bliss. Everything was ready for presentation to the team. All the numbers were checked. The initial framework was there. New. Perfect. Months of hard work lay ahead, but the core was ready.
For a minute he pondered. Would he run it for the endowment? Sell it up to Man Group? Perhaps get some capital from Stanley Fink.
He'd dreamt up the core years ago. But he needed markets to meet him halfway. To get there technologically. For the high frequency guys to put in the infrastructure. For the futures brokers to cannibalize each others spreads down to nil. His edge was niche, specialised. Skilfully risk managed. The leverage needed to get it humming at 600 over T-Bills wasn't even that high. Most of it was embedded in the contract terms. And it was scalable. Give it fives years and every corporate treasurer in the country was going to push their actuaries to get in on this thing.
He yawned and lay back. The pillow was fresh. It was one of those moments, all was right and in equilibrium. Just as it should be. The Professor sighed, stretched and slowly drifted off to sleep.
Urgh. The Professor startled up. "Hello, what!" he cried reflexively. He shot backwards, square to the headboard. As his eyes adjusted, the outlines of a ghostly body appeared in front of him.
Pulling his hands to his face, he squirmed, rubbed his eyes and cheeks, and looked again. "What is this?"
"Hello Professor," said the apparition.
"Oh god. What is this, what's going on?" The Professor span round to look at the radio clock. Half three. He glanced at the Restoril bottle next to it. None had been taken last night, right? Wait. All the late nights had got to him. The sleeping pills were sending him loopy. Slapping his face a few times, he sat up straight and looked forward again.
"Professor, I need to speak with you about your model," the apparition said calmly.
"Oh god. Still there," the Professor mouthed, sub silento. Just engage with it. Let the hallucination happen and then ring Dr. Green. Give him a bloody earful in the morning and get switched over to Klonopin. That was the best way to get this over with. Let it happen. "Okay, so my imagination has created you. What do you want?" the Professor said cockilly.
The apparition smirked. "Your model. Quit now."
"Publish, sure. But then give it up. No good can come of it."
"What are you talking about?"
"Your model. Quit now!" the apparition repeated.
It clicked, suddenly. The Professor remembered his psych classes. This was the Restoril bringing out his superego. Anthropomorphising his inner fears. Just a matter of self-control. His taut muscles relaxed.
"Our work is revolutionary," the Professor objected, feeling faintly bemused at what his mind was having him engage in. At least it was another sign that he was a budding genius. To imagine this at half three. Gotta be smart, he concluded smugly.
"Revolutionary? So was Leland and Rubinstein, so was Black, Scholes."
"Who? What? That's old news."
"Have you spoken to anyone from the real world about it, Professor?"
"Sure I have. I went over the fundamentals with my buddy at the B-School the other week."
"The B-School? The B-School?! What, the same colleague who wrote up the case on the petrodollar merger? Said it was down to pioneering EVA analysis and infrastructure considerations?"
"The same colleague who forgot to mention that the VP for MENA Corporate was doling out back handed favours to every reserve-toting, sinecure cashing, oligarch-connected dolt who came through Heathrow?"
"T-they thought our model seemed practical," the Professor offered, defiantly.
"You don't get it. That Deutsche salesman with the piercing blue eyes, hot butt, and breathy tones? She didn't grab your port sheet whilst you were buying her a drink?"
"I've never even so much as been into a German bank, let alone done business with one!" The Professor reached out to his bedside table, grasping to touch his hardcopy of Hull. He needed some sort of anchor.
"You don't think your risk management framework hasn't been faxed all over town? That Eurotrash capco banker you've been courting hasn't already sold the system up to Rentech? They aren't already running it live? Think your PB lawyer hasn't slipped a special set of terms into the repo appendices just for you?" The apparition was beginning to talk forcefully.
"You're garbling nonsense at me."
The apparition fixed his eye right to the Professors, "I know, you shmuck. You're not getting this are you. God you're so… I bet you never even tried to bed one of your hot postgrads."
"That's it," the Professor fumed, "I'm calling Dr Green about these pills right now."
"You don't think every Merrill Lynch salesman in the country isn't already halfway down their client list, marketing your positions to every dentist and realtor they can get on speed dial? Samuelson's reforming CC, pulling back Kovner, sending Tudor the other side. Leitner and the BT boys are clubbing back together to grind out your spreads. Millennium is six deep into your positions. Izzy's got five guys in already, working over a book."
"We haven't even selected which asset classes to focus on yet!" the Professor yelled.
The apparition let out a curdling laugh. "You really believe Munger and Buffett haven't got your stops list in fifty inch bold font, searing from a three hundred hertz overhead onto their office walls? Einhorn is already buying your distressed claims. Riffing at a conference to a thousand adulatory guests about your liquidation."
"What stops list?" the Professor whimpered.
"You think your model code hasn't already been passed hand to hand in a battered attache from MI5 to Mossad to ISI. Travelled half the world in a diplomatic pouch."
"But… but I haven't written it yet. You're not making any sense."
"You don't think James Bond has had it injected into his forearm in microcode?"
"Bond doesn't exist you idiot," said the Professor, grasping.
"That a Bolivian drug mule hasn't got twenty thousand lines of Python code jammed up his backside on a capesize, on the Panama. He hasn't already sold it to the Zetas?"
The apparition started to crescendo. "You don't think your positions are being taught in grade school, recited in church, presented on the ten o'clock news? Inserted into magazine centrefolds? Served free with coffee? Written on the back of cereal packets? You don't think everyone, everything. Everybody! They all know your position, your stops, your model, your approach?"
The Professors cheeks fell. His lips curled. "Everything you're saying. It is insane, ludacris, madness. Nobody knows my stops, nobody has my code. They're my ideas. You're talking like a madman. It's a work in process. It's great risk management. Revolutionary. It's going to change the way people invest. It's going to get me the Fields. Going to get me rich."
"And get you laid for once, I bet?" The apparition gracefully floated down and an ethereal hand emerged from the dark. "Let's shake on it," the apparition sniggered. As the Professor offered his hand, the apparition yanked him forward. "It's going to get you busted, you idiot." He released and shook his head. He'd seen it so many times before. "Goodnight Professor."
Sunlight. The Professor startled awake. His mouth burnt. Ah, so bright. He covered his face and circled the room with his eyes. He locked onto the bottle of Restoril. Smashing it with his hand, he let out a burst of anger, the remaining pills scattering across the floor. He shouldn't rely on these things. He knew they were a slippery slope. Addictions and emotions weren't for him. Cold numbers and analysis.
Then he remembered the dream. He shuddered. That's definitely it, he thought. Cold turkey on everything save for Aspirin.
Suddenly a burst of energy caught him, and he leapt up from the bed. Stretched his arms up and smiled. Today was the day. He was going to present his model.
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