Eileen Lee talks to the quant’s quant about his qualitative journey into quantitative finance.
He is the coauthor of the Black-Derman-Toy interest rate model and the Derman-Kani local volatility model. He led Goldman’s gangbusting quant unit in the 1990s. His book My Life as a Quant–Reflections on Physics and Finance has become required reading for anyone who is hoping to enter, is already in, or is about to exit the industry. Given all this (just for starters), is it any wonder that this writer should approach the subject with some trepidation? Yes, Emanuel Derman is renowned for his gentle civility even in the toughest spots, but… Fortunately, Derman is sympathetic to the interviewer’s plight and remarks at the beginning of this chat that we probably shouldn’t dwell too much on his background. As he begins his qualitative analysis on the quantitative finance industry today, Derman is as eloquent as his writing suggests he will be, and betrays more than a hint of bashfulness as he confesses his love for writerly pursuits. The first part of the interview took place during the spring of 2007, and we followed up on things again in January 2008.