Starting with the Black-Scholes formula in the 70s and aided by
developments in computing in the 80s, Wall Street firms realized that quantitative techniques can be invaluable in asset management. The migration of "quants" into the financial industry resulted not only in the improvement of existing strategies but also in the development of new ones that could
not have been possible otherwise. Such strategies include convertible arbitrage, volatility arbitrage, fixed income arbitrage, mortgage backed arbitrage, statistical arbitrage, risk (merger) arbitrage, trend following methods, and momentum based methods. The success of these strategies has resulted in recently making hedge funds the hottest thing on Wall Street. However, quantitative methods are not a panacea; the hedge fund industry also bears the greatest ever failure of quantitative methods: the demise of Long Term Capital Management, which in the Fall of '98 almost single-handedly brought down the Western capitalist system.