Job Interview re. Game Theory

[That guy]

So I am thinking about submitting my resume for this job where the description says: To be considered you must possess: "...Strong Quant/Qual/Game Theory skills"

I believe I have solid quant skills but I never studied formal game theory. All I know is what is in Theory of Poker and I know what the prisoners dilemma is... Can anyone direct me to something useful? Either the name of the standard b-school text on game theory or something along those lines...

thanks

[jtr]

"Fun and Games" by Ken Binmore is a good readable intro. (This text is more serious in intention than the title makes it sound, don't worry.)

http://www.amazon.com/exec/obidos/ASIN/0669246034/qid=1109387257/sr=2-1/ref=pd_bbs_b_2_1/103-1579860-1035050

[TStoneMBD]

what kind of job is this? im intrigued.

[elmitchbo]

is the prisoner's dilemma part of game theory? i studied it extensively in economics. i always found it fascinating in it's application to business.

i'd like to learn about game theory too. and i second the question about what job you're applying for... sounds like it could be fun.

[That guy]

what kind of job is this? im intrigued.

hedge fund analyst (long/short equities)

[flub]

They're gonna be much more interested in quant. they probably just added on game theory as an afterthought. It's interesting stuff though so more power to ya if you study it. Quant though 95% quant.

-flub

[That guy]

Quant likely means financial statement analysis and some modern portfolio theory stuff... I am very good at that stuff...

I might try the book listed above, anyone else have a good book recco on game theory? A good undergrad book is fine.... I want basic concepts and a readable text, not arcane mathematical derivations.

[Monty Cantsin]

I cant vouch for the quality of it because I haven't read it yet, but Jesus' dad wrote this intro to Game Theory (http://www.math.ucla.edu/~tom/Game_Theory/Contents.html) which is free.

Read carefully! How can you ever expect to correctly hedge a fund without a complete knowledge of how to win at Green Hackenbush?

/mc

[jtr]

Nice one, Monty.

I'm not a professional game theorist, but I took a quick look at the Thomas Ferguson stuff and it looks like it would also be a good intro. With the hardback of Binmore's book going for $100+ on Amazon, this online material looks like a much cheaper place to start.

PS: what are you, like the only other Brian Eno fan in the world?

[Monty Cantsin]

I found out about it here, so credit goes to the unknown 2+2er who originally posted it.

Eno rocks. Here's a gift for you (http://parslow.com/TigerMountain/).

/mc

[alfatcat]

Here's a book that I used in both undergrad economics and MBA classes. A great introduction with real-world examples.

Thinking Strategically by Avinash Dixit and Barry Nalebuff (http://http://www.amazon.com/exec/obidos/ASIN/0393310353/qid=1109460589/sr=2-1/ref=pd_bbs_b_2_1/104-9874716-7070322)

[RunDownHouse]

Any of Dixit's Game Theory books are pretty standard texts for both undergrad courses and intro b-school courses, and I doubt you'd need anything beyond that for the interview you're giving.

Michael Porter's Competitive Strategy is an excellent text that goes beyond game theory to broader corporate strategic theory.

[disjunction]

Saw this guy give a talk on his game theory work once. The link is his homepage, there are a lot of linked papers. This will likely be too complicated for your needs but it's good to know that its out there.

http://www.cs.berkeley.edu/~christos/

http://www.cs.berkeley.edu/~christos/games/focs01.ppt

[gergery]

[ QUOTE ]
Here's a book that I used in both undergrad economics and MBA classes. A great introduction with real-world examples.

Thinking Strategically by Avinash Dixit and Barry Nalebuff (http://http://www.amazon.com/exec/obidos/ASIN/0393310353/qid=1109460589/sr=2-1/ref=pd_bbs_b_2_1/104-9874716-7070322)

[/ QUOTE ]

This would be perfect for what you're looking for. It's a quick easy read, mostly conceptual not too quantitative.

[elmitchbo]

holy crap. i just realized that i know nothing. that was crazy stuff... if you guys are hip to all that stuff, then no wonder you win. the math was a bit over my head, although i didn't really take the time to figure it out, but the concepts were very interesting to read. my first glimpse into game theory. i'll study up and take the quiz someday. good link, thanks.

[Paluka]

[ QUOTE ]
Quant likely means financial statement analysis and some modern portfolio theory stuff... I am very good at that stuff...


[/ QUOTE ]

This stuff is not usually what is being referred to by "quant skills" in my experience. The math involved for portfolio theory is pretty basic.

[A_PLUS]

I work as a Quant Financial Analyst, and am a PHD student in Financial Econ, so here is my 2 cents.

Now, this is very dependent on the type of Hedge fund they are. But the fact that they mention game theory lends to a more quant driven product. If that is the case, financial statement analysis wil be of minor importance. They can always teach you that. (If you want to get an idea of what is used in the industry rather than academia, check out stuff from the CFA institute).

As for portfolio theory, try to go beyond the basic effient frontier stuff, and learn HOW and WHY. Most likely you wont be applying any old school theory, but expected to know how to use the mathematical tools from them.

For Math, quant funds tend to look for (non)linear programing, optimazation theory, etc.

Also, these products are usually very technology driven. Knowing how to program (C++, etc) as well as use of a major statistics package (SAS, MATLAB, RATS, R, etc).

You can check out this site for some lecture notes on game theory, optimization, etc. http://www.econphd.net/notes.htm
Try to find out the level of math the are expecting. Some funds only interview candidates with at least a masters in math/stat. Some, less intense.

I hope this helps. PM me if I can answer any questions. I do not work on the cutting edge, so I do not keep my deep math or theory that sharp, but I know a good bit about the industry. Hope this helps

[That guy]

Thanks but it is not one of those black box quant funds - they are fundamentally driven. I am not exactly sure what 'quant' means but since I am not a programmer and don't want a job programming, it doesn't really matter... if that is what it is, I am not interested.

I am no math whiz but I am actually a CFA charterholder which required learning about various quant topics... I am quite adequate in stuff like time-series analysis (The CFA has topics such as: discuss how to test and correct for seasonality in a time-series regression. explain how autocorrelations of the residuals from an autoregressive (AR) model can be used to test whether the AR model fits the time series etc...) and Portfolio Quant concepts like: describe the relationship between the CAPM and efficiency of the market portfolio, calculate the expected return and variance of return for a portfolio of two & 3 assets, given the expected returns, variances, and correlation coefficients or covariances of the the assets (lots of flip-flopping of the variables to see if you understand the relationships of MPT stats (Modern Portfolio Theory stats))...

Generally speaking, I understand all the quant concepts so I think I am adequate there. That is not what working at a hedge fund is about but it is needed baseline knowledge. If they want me to just number crunch searching for arcane relationships amidst tons of data, then no thanks. I will leave that to the MIT and U of Chicago hedge funds...

The fact that they put 'game theory' in the job description is a little scary though. Similar to above, I assume they just want to see if you understand the basics... in this case of game theory -- how to think logically (mathematically) in the face of limited information/uncertainty...

we will see...

I ordered that book from Amazon and will try to figure out something intelligent/impressive to say if they lob me a game theory softball... if they ask something tougher than that, then I won't try to BS it too much -- just pretend like I haven't read anything on game theory in a while and try to see if I can summon some terminology that makes it sound like I just need a refresher course on the subject...

[A_PLUS]

Im sorry if my post came across as preaching, I was under the impression you were a recent college grad.

I am glad to see fellow charterholders are as obsessed with poker as I am.

It sounds as if your finance background will be great for a fundamental position. There is a broad spectrum, of funds using various levels of quant sophistication. Quant (in finance) usually just means that the product is data driven. A pure quant product means that the "story" of the company is not considered. They are not all the MIT type products. Some just no more math than correlation, regression, etc.

I must say I am intrigued as to "game theory" reference in the job posting. My gut is that they use some game theory to do their stock selection within their hedged groupings. If that is so, your math skills sound fine. Check out that web site I sent you though. Level 3 CFA material is a great overview of the most relevant Quant tools, but you may benefit from some more in depth analyis. It sounds like a little game theory is all you need though.

The job sounds very interesting, please update the post with how your interview went, etc. Good luck.

One a side note. I gave up poker for 4 months leading up to L2 and L3 of the CFA exams. I would be a liar if I never caught myself thinking, "damn....imagine how far along my game would be if I never sat for the CFA exams". Telling as to where my heart really is.

[That guy]

"damn....imagine how far along my game would be if I never sat for the CFA exams".

I wasn't playing poker when I sat for the exams, wow would that have been another distraction (my kid was born 10 days before the level 3 exam though)...

you know, maybe we can get Carl Schweser to do a poker seminar and help us all out...