EP 054: Components of a black box, humans versus computers, and high frequency trading w/ @RishiKNarang

Aaron Fifield Podcast 2 Comments

To start the year with a bang, I have a very special guest on the podcast this week, who I’d like you to meet – his name is, Rishi Narang.

Rishi has an impressive background, and has been involved with financial markets for over 20 years now. He originally started out as an analyst at Citibank, prior to co-founding TradeWorx with his brother Manoj Narang (a fintech company, turned high-frequency hedge fund).

Since 2005, Rishi has been the Founding Principal at T2AM – a fund of funds, which specialize in short term quant trading strategies.

He’s also the author of Inside the Black Box, and was featured in a must-watch VPRO documentary titled ‘Money & Speed: Inside the Black Box’.

During our discussion (which went for well over an hour), we spoke about; the non-textbook definition of alpha, the components of a black box, where humans have an advantage over computers and vice-a-versa, and we also explore the subject of high frequency trading and speed.

rishi narang inside the black box

“We (humans) are good at coming up with ideas, we’re not so good at implementing.”

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“Data is like blood in the body.”

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Lessons learnt in this interview:

  • Rishi explains how a ‘fund-of-funds’ operates, how traders are evaluated prior to investment, and where they’re are often discovered.
  • The typical structure within a black box – the individual components that come to together to form a black box, and how they interact with each other.
  • Special risks inherent to quantitative trading, and Rishi’s take on common criticisms, i.e. ‘Trading is an art, not a science.”
  • Why the reference of ‘high-frequency trading’ on it’s own is often a poorly defined term – and three defining characteristics to help you better understand the space.
  • Rishi breaks down the sources of latency HFTs aim to minimize, their strategies and how they make money.
  • The problem with Flash Boys; Rishi shares how many of the facts within Michael Lewis’ book lack evidence, and discusses the topic of HFTs front-running orders.
  • Plus much more…

Links and resources mentioned:

  • Inside the Black Box by Rishi Narang – A simple guide to quantitative and high-frequency trading.
inside the black box rishi narang
the truth about high frequency trading

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