Risk Latte - Los Alamos in Banks?

Los Alamos in Banks?

Rahul Bhattacharya
Apr 11, 2005


Recently, we came across an interesting aside in a book called Volatility and Correlation by Riccardo Rebonato. Riccardo Rebonato is a physicist by training and works for the Quantitative Research Group of the Royal Bank of Scotland. Our CEO has a lot of respect for Mr. Rebonato.

Therefore, we were amused and fascinated to read that while Mr. Rebonato was heading the interest rate derivatives desk he had himself discovered, with some degree of bafflement and embarrassment, that the combined power of all the super mini computers running in parallel in his small trading group ranked immediately after Los Alamos National Laboratory in computing power.

Los Alamos is the laboratory where the Manhattan project took shape and is now one of the largest laboratories in the world carrying out physics and engineering research. If a small trading desk of a bank nearly acquires the computing power of Los Alamos it makes us wonder what some of the largest financial institutions with their vast cache of computing power and gigantic horde of physicists and mathematicians can do!

Perhaps the big banks should now think of finally putting all those rocket scientists to work on the sending real rockets to space.


(Reference: Volatility and Correlation by Riccardo Rebonato).

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