Posts Tagged ‘Zero Alternative’

Zero Alternative by Luca Pesaro

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I suppose if I wanted to get into the less friendly descriptions of London traders, I would call them loud, arrogant, young (sorry, to me that’s a pretty pejorative word), macho, loud-mouthed, aggressive, status-obsessed, Porsche-driving, alpha-males. Yet, of course, not all fit this stereotype. Despite the bonus culture which can encourage the pursuit of short-term gains, some traders don’t like taking risks. They particularly don’t like being forced into taking risks they don’t want or understand, i.e. they would prefer to be able to shade the risks. In the real world, this would either mean they refused deals until they were more certain of the likely outcomes, or they would look for insider information. Others look into mathematical modelling as a means of gaining an edge. Interestingly, the financial regulators are beginning to ask whether the fast automated trading systems give an unfair advantage to the banks and the professional traders who can afford them. They are so many seconds ahead of the human traders, they might just as well have inside information when it comes to the outcomes they achieve.

And then we get into the financial modelling. So at a simple level, if the model predicts a binary moment approaching, the trader can take the luxury of time to decide exactly what trades should be made in either eventuality. Once the uncertainty is resolved, the automated trading program implements the trades for the option proved correct. But suppose the modelling begins to exhibit better predictive ability. Up to now, “sciences” such as psephology have tended to “guess” which party or individual is most likely to win an election. Experience shows some elections or political events can destabilise the markets. All rapid movements in the value of equities offer major opportunities for profit if the trader “guesses” correctly, shorting relevant stock in anticipation of a fall in value.

Luca Pesaro

Luca Pesaro

This offers a tantalising possibility if a trader has a relatively reliable predictive modelling tool and is prepared to trust its predictions. “Knowing” the outcome of a national election in advance would allow the planning of a major financial coup. The trader would not be talking about a few millions in profit. He or she would be adding one or more zeros to the potential profit number. All this would depend on the skill of the quants, those maths wonks of mysterious ability who write code no-one else can understand. If they could refine the maths and run simulations showing successful forecasting of real-world events, the traders could make a killing every time. Once the model was proved, it would be time to fight over ownership of the resource. There are many people with deep pockets waiting for more profit that would invest heavily in action to acquire the quants and the models they had produced.

Zero Alternative by Luca Pesaro (Three Hares, 2014) has Scott Walker, our protagonist, as one of these testosterone-driven traders who live for the excitement of the trading floors. In his case, when something less cerebral is called for, he searches out the pain of the boxing ring. Pain because, as he ages — he’s been in the City for fifteen years — it’s no longer so possible to hold his own against the young fighters with fast hands. Given the technological development required to make the modelling a success, this is a near-future novel that places our “hero” at the sharp end of the dealings to decide who shall control access to one of these new predictive packages. At the outset, he’s one of the priests who interprets and implements trading strategies based on what the oracle says. He uses it to reinforce the belief he has in his own intuitive “guesses”. There’s just one problem with all this. Our “hero” is almost the perfect stereotype, right down to the womanising. And, of course, when he scores, the woman is immediately on his side. I should have been born a hero like this. When the quant who guarded the oracle is killed, our hero is framed for his murder and goes on the run round Europe with the girl. You never know. He might have to go to America. Perhaps there’s one of these hidden conspiracies. Stop me if this sounds like something you’ve read before.

Put another way, this is a perfectly serviceable thriller with near-future overtones set in the banking industry where millions can be made or lost on a turn of the market. It’s relatively tough-minded when it comes to describing some of the sex and violence. The structure and pacing of the narrative is good. All things considered, it does as good a job as it could do with this material. In terms of the quality of the ideas, there’s a nice moment of reflection towards the end. So if you find yourself at an airport and want something to fill in the flight time, this will suffice. But don’t look for Zero Alternative as an original twist on thriller themes that’s going to blow your socks off (or anything else you happen to be wearing at the time).

A copy of this book was sent to me for review.

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