"Getting pennies in front of steam-rollers"
I will never forget that expression from our Options faculty(Prof. Duanne Seppi) while referring to arbitrage activities. The prime reason being the hype around this job. There is a huge halo created around IB jobs and when I heard about it from the undergrad alums of CMU business administration group, I didn't like it at all. May be the real excitement is later.
btw, these pennies were sizeable chunks earlier in this century when FnO market had just started in India and high school passouts turned jobbers were transformed to arbitrageurs who made disporportionate income from the whole deal. With the advent of other players in the market, there are barely any opportunities left in the markets.
Professor had one more quote on modelling. At the outset of the first class, he mentioned that I am going to teach you all the wrong models !
Whoa ! You should've seen the look on everyone's faces.
He added after a pause that - however, I am going to teach you how to be an informed consumer of options for your investments and how to choose the best wrong model (what an oxymoron!)
All models are wrong because they make various assumptions and their application is based on environment variables. Hence, Ito Markov may be the best wrong model in one case and the GBM may be in some other.
btw, last class, he gave us a simulation excercise and said "Happy simulating weekend!"
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