The always-good Jonathon Shapiro has published an excellent little profile of former Goldman Sachs MD, Emanuel Derman. Emanuel and I crossed-paths at GS, and have stayed in touch since. From Shapiro:
Derman says: “Your iPad works because someone understands Maxwell’s equations and quantum electrodynamics, and they can build something that does what you want when you hit a button. They use the same kind of math to describe options and markets.
“It looks the same but it’s based on a vague analogy which says stock prices behave like smoke diffusions, it’s not a description of reality. Whereas for Newton’s laws or Maxwell’s equations, that’s the way the world is.”
