Mathematical finance as an accessory to crime
Not long after I finished my PhD in probability theory, a significant fraction of the field was devoured by the financial mathematics moloch. Particularly in Europe, probability theory positions disappeared, to be replaced by openings in financial mathematics, which either went unfilled or cycled among a very few senior researchers and a few quick-change opportunists (and, gradually, their fledgeling academic progeny).
Everyone felt they had to get in on the action, and of course there was a certain amount of positive feedback. When many jobs chase few graduates, it generates huge demand among students for training in such a demonstrably burgeoning field. Obviously, the academic feedback was limited by the fact that most of the eager young ‘uns were seeking employment in banks, not in academia — but the banks were hiring as well. Anyway, just about 10 years ago, a Dutch colleague asked me if I might be interested in joining his own institute’s planned financial mathematics group, for which they were proposing to create TEN new positions. My reply was that finance did not interest me as a topic of research, but I added that there was something unseemly — bordering on unethical — in mathematicians’ headlong chase after banking lucre. The current generation of mathematicians is the trustee of a vast and powerful system of analysis, whose creators were supported, honoured, and financed by public institutions. What is it but a crime, when we abscond with the fruits of this scholarship, and sell it off (cheaply) to banks, who will use it to extract billions of dollars from financial markets? (more…)