Michael Goodkin (August 12, 1942 - June 6, 2022) was a quantitative finance entrepreneur and author.

Biography

Goodkin was born in Chicago. He holds a BA from the

University of Illinois The University of Illinois Urbana-Champaign (UIUC, U of I, Illinois, or University of Illinois) is a public university, public land-grant university, land-grant research university in the Champaign–Urbana metropolitan area, Illinois, United ...

, a JD from

Northwestern University Northwestern University (NU) is a Private university, private research university in Evanston, Illinois, United States. Established in 1851 to serve the historic Northwest Territory, it is the oldest University charter, chartered university in ...

and an MBA from

Columbia University Columbia University in the City of New York, commonly referred to as Columbia University, is a Private university, private Ivy League research university in New York City. Established in 1754 as King's College on the grounds of Trinity Churc ...

in 1968. Based in

New York New York most commonly refers to: * New York (state), a state in the northeastern United States * New York City, the most populous city in the United States, located in the state of New York New York may also refer to: Places United Kingdom * ...

and

London London is the Capital city, capital and List of urban areas in the United Kingdom, largest city of both England and the United Kingdom, with a population of in . London metropolitan area, Its wider metropolitan area is the largest in Wester ...

, he traveled extensively for the companies he founded and also to play backgammon on the international circuit. He last lived in

Chicago Chicago is the List of municipalities in Illinois, most populous city in the U.S. state of Illinois and in the Midwestern United States. With a population of 2,746,388, as of the 2020 United States census, 2020 census, it is the List of Unite ...

.Goodkin, Michael. ''The Wrong Answer Faster: The Inside Story of Making the Machine that Trades Trillions''. John Wiley & Sons, 2012 Goodkin died on June 6, 2022.

Work

Goodkin founded his first company, Counsel's Aide, while a student at Northwestern Law School. The company provided trial lawyers with student legal research by the hour. The first of its kind in the country, it was a successful and upon graduating he sold the company. About to graduate from Columbia University, he saw the opportunity to revolutionize trading by combining the computer with

econometrics Econometrics is an application of statistical methods to economic data in order to give empirical content to economic relationships. M. Hashem Pesaran (1987). "Econometrics", '' The New Palgrave: A Dictionary of Economics'', v. 2, p. 8 p. 8 ...

. A scholarship student with no personal wealth, in 1968 he organized venture capital from a group of private investors, recruited academic economists including

Harry Markowitz Harry Max Markowitz (August 24, 1927 – June 22, 2023) was an American economist who received the 1989 John von Neumann Theory Prize and the 1990 Nobel Memorial Prize in Economic Sciences. Markowitz was a professor of finance at the Rady Scho ...

Paul Samuelson Paul Anthony Samuelson (May 15, 1915 – December 13, 2009) was an American economist who was the first American to win the Nobel Memorial Prize in Economic Sciences. When awarding the prize in 1970, the Swedish Royal Academies stated that he "h ...

, and Robert Merton (all of whom would later win Nobel Prizes in Economics), and founded Arbitrage Management Company (AMC), an idea he had while listening to a guest lecture from Professor John Shelton of

UCLA The University of California, Los Angeles (UCLA) is a public land-grant research university in Los Angeles, California, United States. Its academic roots were established in 1881 as a normal school then known as the southern branch of the C ...

(another founder of AMC). Before graduation, he had raised $250,000 from private investors and hired professors and assistants to develop a computer program to trade Shelton's

convertible arbitrage Convertible arbitrage is a market-neutral investment strategy often employed by hedge funds. It involves the simultaneous purchase of convertible securities and the short sale of the same issuer's common stock. The premise of the strategy is ...

strategy. This is the first known attempt at computerized arbitrage trading. After running a successful

hedge fund A hedge fund is a Pooling (resource management), pooled investment fund that holds Market liquidity, liquid assets and that makes use of complex trader (finance), trading and risk management techniques to aim to improve investment performance and ...

to prove the efficacy of computerized trading, he sold the company to a NYSE member firm and resettled in London. His company's original investment techniques became known as statistical and quantitative arbitrage. By 1996, these techniques accounted for most of the volume on the global exchanges and the financial derivatives market. Having resettled in Chicago, Goodkin then set out to make the market less risky by introducing computational physics to derivatives risk management. Goodkin's most successful start-up was

Numerix Numerix is an American capital markets front-to-risk technology provider. It is headquartered in New York City with nineteen offices worldwide. The company develops analytics and software for Financial risk management, risk management, trading, Va ...

. Recruiting a group of academic physicists, including

Mitchell Feigenbaum Mitchell Jay Feigenbaum (December 19, 1944 – June 30, 2019) was an American mathematical physicist whose pioneering studies in chaos theory led to the discovery of the Feigenbaum constants. Early life Feigenbaum was born in Philadelphia, ...

, winner of the MacArthur grant and the Wolf Prize in Physics for his pioneering work in Chaos Theory, Numerix was founded in 1996. The company's initial product was a software algorithm that dramatically reduced the time required for

Monte Carlo Monte Carlo ( ; ; or colloquially ; , ; ) is an official administrative area of Monaco, specifically the Ward (country subdivision), ward of Monte Carlo/Spélugues, where the Monte Carlo Casino is located. Informally, the name also refers to ...

pricing of exotic

financial derivatives In finance, a derivative is a contract between a buyer and a seller. The derivative can take various forms, depending on the transaction, but every derivative has the following four elements: # an item (the "underlier") that can or must be bou ...

and

structured products A structured product, also known as a market-linked investment, is a pre-packaged structured finance investment strategy based on a single Security (finance), security, a basket of securities, Option (finance), options, Index (economics), indices, ...

. Numerix remains one of the leading software providers to financial market participants. A lecturer at forums including the University of Chicago and the Office of the Comptroller of the Currency, Goodkin is the author of the 1981 best-selling novel, ''Paper Gold'',Macmillan, 1981
/ref> and in 2012 he published his memoir ''The Wrong Answer Faster: The Inside Story of Making the Machine that Trades Trillions''.

References

{{DEFAULTSORT:Goodkin, Michael 1942 births Living people American venture capitalists Columbia Business School alumni University of Illinois alumni Northwestern University Pritzker School of Law alumni