Interview with Dr. Emanuel Derman Xing Talk is a new column runs regularly by Xing Zong, a Chinese graduate student at Duke University. Xing is right now pursuing a Ph.D. degree in physics. He contributes to China.com regularly with his interesting interviews of Presidents in U.S. top universities, Nobel Laureates and business school deans. As Xing said, “my biggest discovery after arriving in U.S. was that my first name “Xing” had a surprising interpretation of the on-road sign crossing. Indeed, I stand at the cross road of two different cultures and eager to connect Uncle Sam and Red Dragon.” Recently Xing held a short interview with Dr. Emanuel Derman.
Finance is one of the most popular career choices for young people in
China. Goldman, Solomon, UBS, these names now became house hold in China.
How to prepare for a finance career? What does the world leading finance
education can offer? With these questions in mind, Xing Zong,
recently interviewed Dr. Emanuel Derman, the legendary quant in Wall Street
and the author of the bestseller "My Life as a Quant: Reflections on Physics
and Finance". About Dr. Emanuel Derman, Emanuel Derman (www.ederman.com) is a professor at Columbia University and director of their program in financial engineering, and is also the Head of Risk at Prisma Capital Partners, a fund of funds. His book, My Life as A Quant: Reflections on Physics and Finance was published by Wiley in September 2004, and was one of Business Week’s top ten books of the year for 2004.
Dr Derman obtained a Ph.D. in theoretical physics from Columbia University in 1973. Between 1973 and 1980 he did research in theoretical particle physics, and from 1980 to 1985 he worked at AT&T Bell Laboratories.
In 1985 Dr Derman joined Goldman Sachs' fixed income division where he was one of the co-developers of the Black-Derman-Toy interest-rate model. From 1990 to 2000 he led the Quantitative Strategies group in the Equities division, where they pioneered the study of local volatility models and the volatility smile. He was appointed a Managing Director of Goldman Sachs in 1997. In 2000 he become head of the firm’s Quantitative Risk Strategies group. He retired from Goldman, Sachs in 2002.
Dr Derman was named the IAFE/Sungard Financial Engineer of the Year 2000, and was elected to the Risk Hall of Fame in 2002.
Z: Dr. Derman, your book “My life as a quant” has been translated into the Chinese language. I am sure many Chinese young people will get inspiration from your story. First question for you, what do you want the young kids to get most out of your book? D: I believe the most important thing for young people is to find a vocation, some interest that beckons to you, and then to follow it. Sometimes the passion for the vocation lasts; sometimes it fades; sometimes it lasts but you can’t make a living on it. I believe, and I tell my kids that, you ought to do what you like for as long as you can, but be willing to compromise when you have to. And people should understand that a vocation requires dedication and hard work; interest and enthusiasm and even talent aren’t enough, most of the time.
Z: A theme that recurs in your book was your love for physics but eventually you pursued a life in finance. My understanding is that as a human being, you always find there is a gap between dream and reality. For example, many people have passion in science, but they end up with some kind of other jobs in order to make ends meet. Do you think that’s inevitable? D: My previous question answered this in part. I was reading a biography of Goethe, and one of the things stressed is that Goethe was both an artist/scientist and a man of the world. He didn’t think that life was a choice between practicality and idealism, between the romantic sadness of the artist and the mundane uninteresting happiness of the regular guy. He thought and showed that it was possible to be happy and creative at the same time. I like this idea. As I said, do what you can, but don’t get nostalgic about what you have to leave behind when you’re grown up.
