Morgan Stanley Traders Lost $390 Million in One Day in August

A

ASusilovic

Oct. 10 (Bloomberg) -- Morgan Stanley, the world's second- biggest securities firm, said its quantitative strategy traders lost $390 million during a single day in August as their computer models failed to account for ``widespread'' investor selling.

The company's traders lost money on 14 days during the quarter ended Aug. 31, ``with the largest single-day trading loss being $390 million,'' the New York-based firm said in a quarterly regulatory filing today.

Morgan Stanley said last month that the quantitative strategies group lost $480 million during the quarter after they were caught off-guard when other investors sold securities to reduce borrowings. The company disclosed today that daily trading losses during the quarter exceeded the firm's trading value-at- risk calculation on six days during the quarter.

The filing with the U.S. Securities and Exchange Commission also shows that the firm's traders generated more than $100 million of trading revenue on about 19 days during the quarter.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net .


http://www.bloomberg.com/apps/news?pid=20601087&sid=aY4.Y24hPlxQ&refer=home

:eek: :eek: :eek:
 
well guess what, I actually happend to interview at Morgan Stanley quant trading team in London back in July with one of their top guys who reports directly to Yazid Sharaiha - their global head of quant trading.. I remember one of the questions that he asked me which I found ridiculous..

this is what he basically presented: imagine 3 cups and under one of them is a coin - and you have to guess under which the coin is sittin under.. assume the cups are numbered 1, 2 and 3.

now let's suppose you choose one of the cups e.g. 2. He then asks given that you choose any of the cups (2 in our example) and he takes one of the remaining cups away (not the one you chose), and if you had a chance to change your decision, would you stick to the cup you initially selected (i.e. 2)?

I immediately said yes. anyone with my mindframe would also stick to their original choice - I won't write an essay why.

the 'right' answer of course STATISTICALLY, as he stated, is you should swap and change your decision. i.e. if you stick with ur decision then 1/3 x 1/2 = 0.16.. but if you switch (implying from the start the coin was under one of the other cups) then 2/3 x 1/2 = 0.33.. i.e. higher probability.

I argued with him that this form of statistical thinking in dealing in the markets is a joke - and he agreed somewhat - but he said if they have a "quantitative/statistical MANDATE for clients" then they have to follow it and stick to it..

I'm not really surprised this is now happened. it made me think how some of these quant groups 'overfit' life with maths and ignore common sense at times.. i remember something one successful trader I met once said - "we use techniques we cannot explain but they seem to work".. just like the successful gamblers before there was statistics.. in other words, anything that can be explained (take statistics) doesn't ACTUALLY WORK.

p.s. don't pm me askin what I do etc no big deal.. it was just a junior graduate job.. and just to add, I searched him on facebook before the interview and he's on it.. just tels you what sort of people are on facebook too these days..
 
Quote from Batman28:

well guess what, I actually happend to interview at Morgan Stanley quant trading team in London back in July with one of their top guys who reports directly to Yazid Sharaiha - their global head of quant trading.. I remember one of the questions that he asked me which I found ridiculous..

this is what he basically presented: imagine 3 cups and under one of them is a coin - and you have to guess under which the coin is sittin under.. assume the cups are numbered 1, 2 and 3.

now let's suppose you choose one of the cups e.g. 2. He then asks given that you choose any of the cups (2 in our example) and he takes one of the remaining cups away (not the one you chose), and if you had a chance to change your decision, would you stick to the cup you initially selected (i.e. 2)?

I immediately said yes. anyone with my mindframe would also stick to their original choice - I won't write an essay why.

the 'right' answer of course STATISTICALLY, as he stated, is you should swap and change your decision. i.e. if you stick with ur decision then 1/3 x 1/2 = 0.16.. but if you switch (implying from the start the coin was under one of the other cups) then 2/3 x 1/2 = 0.33.. i.e. higher probability.

I argued with him that this form of statistical thinking in dealing in the markets is a joke - and he agreed somewhat - but he said if they have a "quantitative/statistical MANDATE for clients" then they have to follow it and stick to it..

I'm not really surprised this is now happened. it made me think how some of these quant groups 'overfit' life with maths and ignore common sense at times.. i remember something one successful trader I met once said - "we use techniques we cannot explain but they seem to work".. just like the successful gamblers before there was statistics.. in other words, anything that can be explained (take statistics) doesn't ACTUALLY WORK.

p.s. don't pm me askin what I do etc no big deal.. it was just a junior graduate job.. and just to add, I searched him on facebook before the interview and he's on it.. just tels you what sort of people are on facebook too these days..
More...

http://en.wikipedia.org/wiki/Monty_Hall_problem
 
Quote from Batman28:

well guess what, I actually happend to interview at Morgan Stanley quant trading team in London back in July with one of their top guys who reports directly to Yazid Sharaiha - their global head of quant trading.. I remember one of the questions that he asked me which I found ridiculous..

this is what he basically presented: imagine 3 cups and under one of them is a coin - and you have to guess under which the coin is sittin under.. assume the cups are numbered 1, 2 and 3.

now let's suppose you choose one of the cups e.g. 2. He then asks given that you choose any of the cups (2 in our example) and he takes one of the remaining cups away (not the one you chose), and if you had a chance to change your decision, would you stick to the cup you initially selected (i.e. 2)?

I immediately said yes. anyone with my mindframe would also stick to their original choice - I won't write an essay why.

the 'right' answer of course STATISTICALLY, as he stated, is you should swap and change your decision. i.e. if you stick with ur decision then 1/3 x 1/2 = 0.16.. but if you switch (implying from the start the coin was under one of the other cups) then 2/3 x 1/2 = 0.33.. i.e. higher probability.
More...

I remember reading about this scenario in The New Market Wizards - it always pays to switch.
 
the point I was trying to make is that this is a STATISTICAL argument.. I understand probability well.

My point was, if statistics was god in this life, we wouldn't have some of the problems we have around us. man's science is from his able perception, and remains more or less theory.

statistics rarely proves anything.

hope I make sense.
 
Maybe some should tell them about stop loss positions...

Also neutral networks allways fail. They cant pick turning points.
 
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