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VP, Equity Volatility Strategies Group
Goldman Sachs, New York
Wall Street has definitely become a more solemn place since Elena Perazzi, MFE 04, decided to trade a physics lab in Italy for a job in investment banking five years ago.
But while “quants” like Perazzi have taken considerable heat for developing complex risk management models that failed to anticipate the financial crisis, their culpability is not so black and white, she says.
“Some of that is looking for a scapegoat,” says Perazzi, a VP at Goldman Sachs. “But in some ways it’s true. You model things mathematically, but you can never model the entire world. You can only simplify. And being aware of that fact doesn’t take away the risk.”
A native of Italy, Perazzi earned a doctorate in physics at the University of Padua in 2000, researching gravitons and gravitinos, hypothetical particles that are believed to mediate the forces of gravity and supergravity. It’s possible, she notes, that neither particle actually exists.
Perazzi enjoyed physics, but found it “hard to find a good job in physics, in an institution that’s doing good work, that’s also in a city.” So she came to Berkeley, earning a master’s in financial engineering in 2004, and applied her training to the equally unstable stock market.
Weighting, in real time, various market variables to determine appropriate pricing, Perazzi employs stochastic calculus to build the tools that Goldman’s traders use to hedge risk.
“When I started at Goldman, I thought I would only find the math interesting,” Perazzi says. “But now, being close to the markets is the most interesting -- trying to understand how the math plays out.”
Helpful as it may be, stochastic calculus can’t extend Perazzi’s vision more than a few hours. So don’t ask her about the long run. “It’s not as if what’s happening next year is not important,” she says. “It’s just that you can’t model it.”
Elena Perazzi, MFE 04