“Paul Wilmott is the smartest of the quants,” says his friend and fellow quant Nassim Nicholas Taleb. “He may be the only smart quant.”

It’s typical hyperbole from the author of The Black Swan, the bestseller about the role of random events in markets and in life, but it is true that Paul Wilmott, publisher and editor in chief of Wilmott, is looking pretty smart these days. Wilmott and his magazine, which is aimed at the quantitative-finance community—the math geeks at banks and hedge funds—foresaw many of the problems that dominate the headlines today. He and the contributors to the magazine, whose influence far outstrips its small circulation, were railing about the limits of math and financial models far in advance of the meltdown.

Wilmott’s bimonthly magazine is at the center of an informal and global quant salon. Its readers are both kinds of quants: the ones who devise and value the derivatives that have caused so much commotion at the banks, and the ones who trade on behalf of hedge funds and were hit hard in the August 2007 downturn. Wilmott is like a technical handbook to the subprime mess and may provide, with any luck, a way out. In its pages, some of the most influential—and financially successful—members of the quant universe gather, many of them deeply skeptical about the instruments their class has created.

The first thing most people notice about Wilmott is the price. At £395, or around $800, a year’s subscription of six issues works out to about $130 an issue. “They get stolen a lot,” Wilmott says. “I’ve heard that a lot of subscribers hide them in their desks as soon as they get them.” Despite the gloom in the markets, Wilmott says, subscriptions—which number about 2,000—have held steady and advertisers, many of whom hawk sophisticated software, have stuck with him. The magazine’s website is the preeminent forum for quants on the internet, with more than 55,000 registered members.

Wilmott is a self-described contrarian and, in a way, Wilmott and its contributors call into question the whole enterprise of quantitative finance, doubting the usefulness of its vaunted models, particularly their ability to predict or value anything. The magazine has published attacks on every aspect of the modeling that gives value to derivatives.

“But we’re still promoting quantitative finance,” Wilmott says, after I ask him if there isn’t something odd about a magazine that seems bent on undermining its own field. “We believe in it, and we believe in math, even now. I’d like to quantify everything. A world expressed in mathematics would be a better world, in my opinion.” As Wilmott forges on through the crisis, its mission is to keep questioning specious theories and find out what actually works.

Quantitative finance may be at a 20-year low, but it is not going away. Too much of the financial world’s machinery now runs on it.

There are other journals for quants, but Wilmott’s odd wit, surprisingly beautiful design, and star-studded list of contributors make it special, even for nonquants. In the November 2007 issue, Ed Thorp wrote a piece called “Investing in Hedge Funds.” To have Thorp writing about that topic is like getting advice on how to run an insurance company from Warren Buffett. Thorp, now 75, is among the oldest and most successful of the quants. He ran hedge funds for decades and says he has averaged a 20 percent return, after fees, over the past 30 years. He taught math at M.I.T. and invented the modern version of card counting, chronicled in his bestseller on blackjack, Beat the Dealer.

Each copy of Wilmott is 11 inches square, runs about 100 pages, and is printed on expensive glossy paper. The covers are designed by Liam Larkin, a graphic artist based in London, and they are often darkly funny. The March 2007 cover, which appeared before two Bear Stearns hedge funds collapsed and kicked off the subprime crisis, shows a bird’s-eye view of a teacup with leaves at the bottom in the shape of the Grim Reaper. The January 2008 issue features a Japanese-style print of a tsunami with a little house perched atop it.

Wilmott, found recently in his London office, is a trim 5 foot 9, has sandy brown hair, and wears glasses with heavy black rectangular rims. He is 48 but looks 38. “Math is supposed to keep you young,” he says. “At least mathematicians like to think so.” He is the author of a three-volume, 1,500-page anchor of a book called Paul Wilmott on Quantitative Finance. The latest edition lists for $295. He has written two other books and edited about 10 more, all of which are attempts to explain the high-level math underlying the derivatives that have dominated Wall Street in the past decade.

Raised in Birkenhead, across the Mersey River from Liverpool, England, Wilmott began turning his interests into businesses at an early age. When he was in a childhood pet-keeping phase, he started a zoo on his porch and in his garden—with mice, guinea pigs, goldfish, and a tortoise—and charged admission for entry. Later, he paid for his education by juggling; his hands are still covered with tiny scars from tossing around burning torches.

Although neither of his parents went to college, Wilmott made it to Oxford, where he earned a D.Phil. (Oxford’s equivalent of a Ph.D.) in applied mathematics in 1985. When he wasn’t competing against Cambridge on the ballroom-dancing team, he worked on modeling phenomena like the flow of air over a propeller blade or water around the hull of a submarine. He was introduced to financial mathematics a few years after he got his doctorate, when a colleague inherited some options. “It had never occurred to me that there was room for the kind of math I did in finance,” Wilmott says. “I thought the financial world was all pinstripes and connections and cigars.”

Wilmott began lecturing and writing about math and finance and started consulting; he did research for Japan’s Nomura Holdings one day a week for six years. Along the way, his skepticism about the field grew. “When I started, I tended to believe everything I read,” he says. “The books would say that volatility is constant, and I would say, ‘Okay. Fair enough.’ ” Volatility measures divergence from the mean, and at the heart of many formulas for finding out how much a financial product is worth is an assumption that volatility, though it may stray a bit, always returns to a normal level. “But as I started looking at more and more data,” he continues, “I began to realize that volatility is not constant.” Large deviations—the black swans that Taleb made famous in his book—were to be expected. “Finance isn’t like fluid dynamics,” Wilmott says. “You’re modeling human behavior, so you’re never going to get it right.”

From 2002 to 2005, Wilmott was a partner at Caissa Capital, a hedge fund that had as much as $170 million under management and speculated on changes in market volatility by buying and selling options on Standard & Poor’s 500-stock index. Caissa’s main fund averaged a 9.4 percent annual return. It closed down following a partner disagreement. Wilmott now oversees a global distance-learning program called the Certificate in Quantitative Finance, which trains bankers in the intricacies of the craft. The program, run from a slick office amid the skyscrapers of downtown London, has students from most major banks and turns out about 500 graduates a year.

There are two kinds of articles in Wilmott: the ones you can read and the ones you can’t. Examples of the first include “What Is the Interest Rate in Hell?” by Aaron Brown, which dissects financial scenarios in the work of thriller writer Jim Thompson, and “Quant Life in Singapore” by Manoj Thulasidas, musings on the Asian country’s respect for its small cadre of quants. Espen Haug, a regular Wilmott contributor, occasionally adds a quant comic strip in which a superhero in dark sunglasses travels the globe battling mathematically impossible phenomena like “negative volatility.” And there are car reviews. When Wilmott’s not quanting, he’s usually thinking about cars. He has an Alfa Romeo and a Jensen that he loves so much, he rarely drives it.

The other type of articles are dubbed “technical papers.” For quants, these are the heart of the magazine and its value, and they traffic in the kind of brain-melting math that separates the casual reader from the professional insider. The November 2007 issue, for example, includes a 22-page piece, the title of which alone is scary: “Analytical Techniques for Synthetic C.D.O.’s and Credit Default Risk Measures in Static Fac­tor Models.” It discusses complex mathematical equations.

Much as he loves the hard math, if Wilmott had his way, quantitative finance would better balance its academically quantitative aspect with its market-based financial one. “You have traders and you have quants, and very rarely do you have someone who sees both sides,” says Wilmott, who considers this disconnect to be the root of the current crisis. The quants were using their models to value products that they had no experience trading, and the traders were dealing with products they could never properly value themselves.

“Banks and hedge funds employ mathematicians with no financial-market experience to build models that no one is testing scientifically for use in situations where they were not intended by traders who don’t understand them,” Wilmott wrote in a recent post on his blog. “And people are surprised by the losses!”

Not too long ago, Wilmott wandered into an auction at the Savoy, the famous London hotel, and his visit reveals a little of how a quant’s brain works. The Savoy was unloading just about everything, from ashtrays to beds, in anticipation of a $200 million renovation. Fifty beds went up for sale one by one, and in that, Wilmott saw a picture of a market in miniature. He charted each of the selling prices, which spiked and dropped wildly over time, though all the beds sold were apparently identical. For him, it exemplified the challenge that models face in trying to predict human behavior.

On the way out, Wilmott passed a man happily examining his new purchase. It was Uri Geller, the magician who famously convinced scientists that he could bend spoons using just the power of his mind. Naturally, Geller had purchased a box of silver spoons. “He gave me a spoon-bending demonstration, but it wasn’t very convincing,” Wilmott says, with the troubles of the past months clearly in mind. “It just goes to show you how easy it is to fool a man of science.”