Paul Wilmott (born 8 November 1959) is a researcher, consultant and lecturer in quantitative finance. He is best known as the author of various academic and practitioner texts on risk and derivatives, for Wilmott magazine and Wilmott.com, a quantitative finance portal, and for his prescient warnings about the misuse of mathematics in finance.
One of two sons of an accountant and an entrepreneurial mother, Wilmott attended grammar school in Birkenhead, and read mathematics at St Catherine's College, Oxford. He stayed on to get a DPhil in fluid mechanics in 1985.
After working on mathematical modelling for various industries, Wilmott learned of the potential uses of mathematics in quantitative finance from a friend, and decided to become a consultant in the subject. He is currently the co-owner and Course Director for the Certificate in Quantitative Finance, a half year distance learning course on mathematical finance at Fitch Learning, a London-based company providing training for the financial services industry. He was a founding partner of Caissa Capital, a volatility arbitrage hedge fund, since closed, and founded the Diploma in Mathematical Finance at Oxford University; and the journal Applied Mathematical Finance. He is a director of Wilmott Electronic Media, which manages Wilmott.com, a website for the quantitative analyst community, and is a director of Paul & Dominic Quant Recruitment.
Criticism of misuse of financial mathematics
Wilmott is a vocal and long-standing critic of the use of mathematical models in finance by quants. In a paper published by the Royal Society in 2000, he stated that "It is clear that a major rethink is desperately required if the world is to avoid a mathematician-led market meltdown...The underlying assumptions in the models, such as the importance of the normal distribution, the elimination of risk, measurable correlations, etc., are incorrect".
In 2008, he expressed his frustration in the lack of progress made in adopting more appropriate models:"I don't like the assumptions, the models, the implications....Banks and hedge funds employ mathematicians with no financial-market experience to build models that no one is testing scientifically for use in situations where they were not intended by traders who don’t understand them. And people are surprised by the losses!"
Writing six months before the depths of the 2008 financial crisis, he stated: "I predict that things are going to get even worse".
Reflecting his concerns, in 2009 Wilmott and fellow quant Emanuel Derman co-authored the Financial Modelers' Manifesto, which lays out a series of principles for more responsibility in risk management and quantitative finance
In addition to research papers on quantitative finace, Wilmott has authored several textbooks, including:
- Frequently Asked Questions in Quantitative Finance (Wiley 2009)
- Paul Wilmott On Quantitative Finance (Wiley 2006)
- Paul Wilmott Introduces Quantitative Finance (Wiley 2007)
- Frequently Asked Questions in Quantitative Finance (Wiley 2007)
- With J.N.Dewynne and S.D.Howison, Mathematics of Financial Derivatives: a Student Introduction. (Cambridge University Press 1995).
- With Dominic Connor, Paul & Dominic's Guide to Quant Careers.
- Guardian profile and interview
- Financial gurus
- Number cruncher who foresaw financial crash by Elena Moya The Guardian 1 May 2009
- Paul Wilmott at the Mathematics Genealogy Project
- Interview: Condé Nast Portfolio
- Certificate in Quantitative Finance (CQF)
- Diploma in Mathematical Finance at Oxford University
- Applied Mathematical Finance
- Wilmott, Paul "The use, misuse and abuse of mathematics in finance." Philosophical Transactions of the Royal Society of London. Series A: Mathematical, Physical and Engineering Sciences 358.1765 (2000): 63-73
- This Is No Longer Funny Wilmott blog entry 10 March 2008
- Full text of Financial Modelers' Manifesto
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- opinion piece: New York Times
- Interview: Condé Nast Portfolio
- In Business Week
- Bonus Babies in New York Times
- Revenge of the Nerd
- Paul Wilmott says nothing has changed with the banks, CNBC
- The maths of the credit crunch