Wayne Himelsein

Over my 25yrs in the game of quantitative investing, and drenched in equations and models, I've honed in on the only math that really matters: Minimize drawdowns during unfavorable times. The multiplicative nature of positive returns during good times does all the rest.

@Ksidiii Thanks @Ksidiii 😀

Unless this turns into a full-blown tail event, in the coming weeks you’re going to hear about long volatility and tail risk products losing money in this selloff. You’ll probably ask yourself, “Wait, how does that make any sense? You lose money for years waiting for a crash, and when it finally happens, you still lose money?” Wayne does a great job explaining this. I’ve spent years trying to explain it to foundations and pensions. These rigid, dogmatic tail risk structures are not strategies—they’re marketing narratives. They look great on paper but consistently underdeliver when you need them most. What you actually need is a dynamic system—one that understands where the value is on the volatility surface, across tenor and delta, and knows when it makes economic sense to sell that risk back to the market. A system that adapts in real time to changing market conditions.

@mmencherogarcia Thank you, Mariana. Frustratingly, I have already reported this impersonating account twice, but no response or action from @TwitterSupport yet.

Hey @WayneHimelsein someone is impersonating you. I already blocked and reported the account, but I think you should know.

@xmjEE Thanks... already reported.

@WayneHimelsein g'morning, you're being impersonated by WayneHimeLsen You might want to ask people to report that account

@gordonschuecker Thx. Reported.

@WayneHimelsein cc

Over my 25yrs in the game of quantitative investing, and drenched in equations and models, I've honed in on the only math that really matters: Minimize drawdowns during unfavorable times. The multiplicative nature of positive returns during good times does all the rest.

@FREAK0NAUT @LyfeOfPELK All the data points of all high magnitude drawdowns in history are still too sparse for any real empirical value; that wasn't the point. This illustrates the others scatter as options do, with convexity, but 2022 is clearly linear. (IV hit 120+ in '08; its convexity is a given).

@LyfeOfPELK how could you not include 2008 @WayneHimelsein ? to me without that there's only 2 data points on here 2020 and 2022 so it's hard to divine anything from it

$SPY Awesome graph

@ML_Yeth_ exactly.

@WayneHimelsein Quant is a perspective more than it is a subject

Someone recently asked me to “teach them quant”, which got me thinking - how do you really teach that? Sure, one can be taught math, modeling, testing protocols, etc. but as to being a quant, that’s just in you, or not. What makes me a quant, above all, is my drive to quantify.

@Bradlito1 nice quantification!

@WayneHimelsein Right. Example: A non-quant wants to know how fast Usain Bolt ran the 100m. A quant wants to know: 1) his reaction time to the gun; 2) his top-end speed; 3) where (in meters) it occurred; and 4) how much it fell off at the end of the sprint. And, this'd just be for starters.

@WayneHimelsein I’m driven; Driven to be smarter; Driven to work harder; Driven to be better everyday; Driven to keep on and on; To achieve the things I want; I’ll be sorry if I don’t; Make the most of livin’; I’m driven” ― Dolly Parton, Run Rose Run

@manishbidasaria ...and, finally, be comfortable with being able to implement the 0.001% 😉

@WayneHimelsein I would start with creativity - get comfortable brainstorming and trashing 90% of ideas. Then learn the specific tools to best flesh out the remaining 10%. Without creativity, quants end up overfitting data and build strategies with low explanatory/staying power.

@OptionAlpha3 Absolutely... Starting with, how does one quantify "value"? For ex: Price/Book is a quantitative measure, but is it the best one? Perhaps testing metrics or ratios adds insight. Or assessing value edge in shifting market regimes, etc..

@WayneHimelsein Do you think there is any crossover between the value investing philosophy and being a quant? Or could there be?

@choffstein Corey, there's literally no risk of you annoying us by highlighting our thoughtful content... always happy to support your efforts to illuminate and educate!

At the risk of annoying @WayneHimelsein, I wanted to highlight this section of his monthly letter. In my original rebalance timing luck paper, I pointed out that benchmarks can benefit from RTL (Image #1) Convexity makes RTL impact explode. Wayne discusses nicely (#2 & #3)

@reddykk Put spreads; calendar or moneyness, e.g. short ATM, long OTM, or short Feb ‘23, long Aug ‘22, and the endless other combinations within and across like or dispersed underlyings.

A fun conversation…

A great irony of quant research is the idea that the data is full of possibilities. Yes, it is - the next innovation may be in there. At the same time, its full of constraints and obstacles; from bias to randomness to overfishing decay - an enemy that grows stronger with time.

@vixologist @NotQuiteMidlife @daveblob As an easy example, don't ever build Black-Scholes, just go online and download an excel plug-in. And once you have that, utilize it to spend your time building a model to best price the IV vs. RV relationship, and what is cheap/expensive for the spread in terms of your process.

@vixologist @NotQuiteMidlife @daveblob Assume so! Waiting for reply... in the meantime, my read of it is that its not worth our resources to build straightforward/linear models, they're all out there already. Our time should be spent on building models that serve our own decision process - tools that give us guidance.

@vixologist @NotQuiteMidlife @daveblob Always happy to interpret, but can't interpret what I can't see:

@NotQuiteMidlife @daveblob Perhaps we can coax the quant philosopher @WayneHimelsein to interpret for those of us still unclear 🤔

@pravtweets Exactly!

Claude Shannon described information as “the resolution of uncertainty”- the view ahead may be fuzzy, but as more information rolls in, the resolution increases toward clarity. In financial markets (and life) the question for each of us is what resolution we need to take action.