Derivatives Models on Models

Edward Thorp on Gambling and Trading

Ed Thorp was the first to develop a wearable computer, he made money in Las Vegas using quantitative methods, he was the first to start a market neutral derivatives hedge fund: Princeton Newport and he knew about market neutral delta hedging years before Black, Scholes and Merton published their work. Edward Thorp has published the best selling books “Beat The Dealer” and “Beat The Market” together with Sheen T. Kassouf. He has published numerous articles on gambling, trading and hedge funds. Ed Thorp is a columnist for Wilmott Magazine.

Haug : Where did you grow up?

Thorp : First 10.4 years in Chicago IL then in Southern CA.

Haug : What is your educational background?

Thorp : B.A. and M.A. Physics, Ph.D. Mathematics, all at UCLA. More in “Who's Who in America”.

Haug : Why did you decide to give away many if not most of your Black-Jack tricks in the best selling book “Beat the Dealer”?

Thorp : I had no intention of becoming a professional gambler. I was mainly interested in the science of the subject, and figured that I'd collect enough money prepublication to satisfy me. I also wanted to fill a void in the mathematical knowledge of this game and more generally of gambling games in general.

Haug : You worked as a mathematics professor at the University of California at Irvine, why did you decide to leave academia and go into professional trading?

Thorp : “Some are born professional traders, some become professional traders, and some have professional ...