Pignolo - Lively, dense wine with real potential

says Jancis Robinson, the renowned wine critic.

In my Merlot post I announced to write about this indigenous Friulian wine. No sorry...the story how I got another outstanding rare wine.

No, I'm not an elitist. I don't like rare wines because they are rare. But, my wine preferences include wines from autochthonous grapes...and their outstanding exemplars are often rare.

Time to out my wine preferences.

Wine genres?

I like reading and love music (from John Adams to John Zorn). Literature and music are categorized by genres. And this inspired me to think of wine genres - without naming them. Even more, I understand a wine as a story. Genre is a difficult foundation of story to wrap my mind around. And so it is for wine.

I borrowed the concrete idea from Shawn Coyne's great blog the story grid (Genre's five leaf clover).

Honestly, when I read some of the tasting notes, I need to smile about the creativity…when the wine "sings in the glass", or (a Chambertin!) "shows a nuanced smell of a wet dog pelt" (which dog - has it a name?)…

And, especially why they fit so well to this and that dish. I do not care much about this. I eat the dish and then I drink the wine. So, is it then concluding the last dish or preparing for the next? Food companion is not a genre criteria for me.

Oh sorry, I start driving onto an intellectual side row.

The five leaves of wine genres:

Length - from flash to "infinite"
Nature - from natural to absurdly constructed
Style - from "documentary clear" to dramatic (when not theatrical)
Structure - from linear to complexly nested
Content - fruit, flowers, spices, herbs, minerals, exotics...

No, I do not distinguish nose, color, taste,…

I like multi-genre wine drinking, but my favorite wines are usually medium long, natural, documentary clear, moderate complex but dense, mineral or floral (but not baroque florid).

Example from one of my favorite regions, Rhone: I give preference to North Rhone wines over Chateauneuf du Pape and the white over the red… This leads to the non theatrical white Hermitage (like the affordable Ferraton  Miaux) or the expensive Condrieu Chateau Grillet.

Pignolo fits perfect to my favorite genre. Lively but dense (I agree JR!).

How to get the Pignolo that fits for my favorite genre?

The first time I came to Cormons I had nothing than the wine books and the drinking experience of, what I call, the big label wines...Jerman, Vintage Tunina a prototype.

But, I was lucky to select Aquila D'Oro at Castello di Trussio for a wine and dine evening at this first visit. The owner of the restaurant (and castle), Giorgio Tuti, introduced us to the indigenous wines from great vintners: Ribolla from Gravner and Radikon, Tocai (now Friulano) from Vie de Romans

But at the beginning, Giorgio Tuti and us were mutually risk averse and exchanged only the "secure" opinions. Later, when we knew each other better, he rolled his eyes imperceptible when I asked for a dramatic Pinot Grigio from Ronco del Gelso…and served a documentary clear, onion-colored Pinot Grigio from Pierpaolo Pecorari instead.

My preference for Borgo del Tiglio has its roots at that time - result of guided exploration, wine by wine.

Once, Giorgio Tuti recommended "the" Rosso from Gravner and arose my love to Friulian reds.

The first Pignolo was from Dorigo. At a later visit he served a Pignolo magnum of another cult property: Moschioni. We knew already Moschioni's Refosco and Schioppettino and were surprised how clear and floral the Pignolo was.

2004, Jerman's Pignolo Special Edition for Gorgio Tuti

Giorgio Tuti has sold some land around the Castello di Trussio to Jerman. And they came to an agreement that Jerman will plant Pignolo at the most qualified corner…and Giorgio will get a special Edition of a selected year.

What I've suppressed: in less favorable years the Pignolo can be a bit rough…2004 was perfect (Pignolo's quality is volatile).

Last week, Giorgio Tuti sold me three bottles of his special edition. I will wait a few years to open it…I hope.

p.s. to share a new recommendation of Giorgio Tuti: Ronchi Ro

What Quant Finance Research Could Learn From "PureTech"

Why I joined PureTech wrote Joi Ito, director of the Media Lab at MIT, recently.

It's about the intersection of science and commercialization. A way to resolve the entrepreneurship paradox.
PureTech, Giving Life to Science, is a science and technology development and commercialization company tackling tomorrow's biggest healthcare problems
Their purpose is
radical innovation in health
and PureTech
has a thematic, problem-driven approach to starting companies, proposing non-obvious solutions rooted in academic research and developing them together with a brilliant group of cross-disciplinary experts
In short, PureTech focuses on taking science and engineering, primarily in the healthcare area, and developing innovative products and companies. Yet another incubator? No, much more…


In my factory automation time (25 years ago) I dreamed of establishing a "walk in center" for complicated discrete manufacturing problems. With industrial scale flexible manufacturing islands, and labs…with researchers from distinguished academic institutions and industry and practitioners from manufacturers...finding new operation plans, creating new tools, set ups...and running concrete experiments on the most complicated parts.

It never materialized, because I failed to convince the authorities to make it happen (manufacturers and manufacturing system providers were enthusiastic)…but the idea was a kind of "PureProd".


MathConsult, Andreas Binder CEO, is a spin off company of the Industrial Mathematics Institute of the Johannes Kepler University of Linz. They also partner with the Radon Institute for Computational and Applied Mathematics (RICAM) of the Autrian Academy of Sciences. 100+ mathematicians and physicists work in this IndMath center in Linz - with 25 at MathConsult.

MathConsult transforms their core competencies - Numerical Simulation and Inverse Problems - into complex systems and products for concrete industrial partners in the areas of Metallurgy/Chemical Engineering, Multi-physics problems, plastic deformation, dynamical multi body systems, Adaptive Optics

Their key technologies embraces hundreds of cross-sectoral mathematics software programs and there is translational research going on within MathConsult to create new systems for their partners. 


Those libraries were the key to add a new competency: Computational Finance. Some of the approaches are presented here. 

We built UnRisk and created the UnRisk consortium for technology development and commercialization. UnRisk concentrates on derivative and risk analytics and we've decided to unleash our technologies and provide the corresponding know how packages. 

What we haven't done: intensive fund raising (one of the PureTech strengths). But we offer options, like project-for-product cost arrangements…

However, we think, we are a new kind of quant finance company. But this is "in the small".

In the large, quant finance lacks radical innovation. Consequently, regulators decided to force a kind of bureaucratic regime by standardization and centralization. Nothing to become mad about…what should they do instead?

Quantifying behavioral risk?

There's the big discussion about state risk and behavioral risk. Fama got the nobel prize for showing that there's only state risk (EMH) and Shiller for emphasizing on behavioral risk.

But behavioral risk will never be a topic that goes beyond intellectual discussions at market risk cocktail parties, if it doesn't become computational.

And this is really hard work. A mathematical Hercules task. It can't be done by single groups alone. It needs collaboration and antidisciplinary

The mathematics may be influences by game theory, evolution theory…and probably the approach of cellular automata…but also "pure mathematics" will play an important role in the sense that its models may speak out a behavior (not only a state transition…). 

Don't do it alone - cooperate. cooperate. cooperate.

But, this will only happen when the financial circles recognize that strict competition is an innovation killer. If we do not cooperate more, financal markets will be increasingly conducted by regulation and run into the next crisis based on regulatory arbitrage...

PureTech is a great company.

p.s. as Andreas posted yesterday we've received a research grant for doing the counter party risk valuation "the UnRisk way".  If you want to partner, we will be happy to...

Research grant for counterparty risk valuation to MathConsult

The challenges - both from the algorithmic and the data management point pf view - in calculating CVA and its modifications made us apply for a research grant with the Austrian Research Promotion Agency ("Forschungsförderungsgesellschaft" FFG) within their General Funding Programme. Last week, we got the good news that our application was successful and will be cofunded by FFG.

They work quite efficiently: From submitting the application to the funding decision, it took only two months.

Sicily the Land of Forestry Police?

Sicily employs 28,000 forestry police - more than Canada. Read at Marginal Revolution.

It's from a story about Italy's hopeless south…suggesting that Italy is in terminal decline

Too pointed, IMO. But yes, Italy doesn't grow.

To Buy The Rare Outstanding Merlot You Need Patience?

As mentioned in my recent post  …leave a paradise, I visited Cormons in the center of one of my favorite wine regions Collio (Friuli Venezia Giulia, IT).

The paradox of choice

"Collio" is rolling hills cultivated as if they were private gardens. This is their benefit and problem. Many wineries in a small region produce a broad variety of wines with indigenous wine varieties.

I like the Collio (Tokai) Friulano, (Pinot) Bianco, Pinot Grigio, Ribolla Gialla,…and Merlot… But, if I finally have selected, I might need to come and be patient.

Rarer with the square of distance

Most of the wineries are so small and their varieties so manyfold that not much bottles find their ways outside the region, Italy.... Of course, you can find wines of the larger top vintners, like Livio Felluga, Marco Felluga, Villa Russiz… world-wide.

But, my favorite winery of the whole Friulian wine region (Collio, Carso,  Colli Orientali, Friuli-Grave, ..) is rather small: Borgo Del Tiglio. Its owner and wine maker Nicola Manferrari took a degree in Pharmacology and worked in his mother's pharmacy, before he took over the small family vineyard and firm. He decided to produce wines of the major local grapes…and the top selections in "pharmacy volumes".

I never managed to buy a bottle of their top wine "Rosso Della Centa" (Merlot), outside a restaurant. Only about 1000 bottles of RDC are made in great years.

Last Friday I showed friends their little exhibition room (the former pharmacy). And...drumroll…Nicola Manferrari sold me three bottles of his outstanding and rare RDC 2007. The first after many tries over years.

BTW, Merlot is not a wine that readily comes to mind when discussing Italian wine. But they have increased in popularity.

2007, Masseto, Tenuta dell'Ornelaia - average EUR 450
2007, Redigaffi, Tua Rita - average EUR 185
2007, Messorio, Le Macchiole - average EUR 150
2007, L'Aperita, Castello di Ama - average EUR 125

(all from Toscany) are the most celebrated and wanted representatives.

The RDC is sold at EUR 65 at the winery. And, IMO, it can compete with the above.

Other recommended Merlots from Friuli:

Graf de la Tour, Villa Russiz
Maurus, Vie de Romans
Semidis, Masut Da Rive

There are a few cult properties in Friuli - one is "Miani". They make two Merlot, Buri and Filip, both above EUR 200 a bottle. Again, I prefer RDC (for its elegance and fine structure compared to the very rich body of the Miani's...).

There's one more thing. My surreptitious favorite grape in the Friuli region (dominantly Colli Orientali) is the autochthonous Pignolo. Rare and recently rescued it shows great potential. Usually, one ha of a Pignolo vineyard does not produce more than 1200 bottles.

In one of my next off topic posts, I'll tell how I got three bottles of a special Pignolo edition that was made by a famous vintner for a celebrated restaurant.

p.s. today, I googled and found another source of the 2007, Rosso Della Centa ;)

Weekend Impressions

Yesterday I went hiking and was again fascinated by the Austrian mountains, which never cease to amaze me. I spent a wonderful day in the sun above the fog that was present in the lower regions. The view was beautiful and I enjoyed the quiet and the peacefulness.
And since I had such a great time I want to share my impressions from yesterday with you.

The picture below was taken at the top of the Erlakogel and it shows the Traunstein in the distance. Enjoy!

Sum of reciprocal primes

Last week, in A Prime Discussion, I asked the question if the harmonic series of prime numbers, i.e.,
coverges or not. Well, the answer is: It does not converge but grow beyond any limit. The following proof follows ideas by the famous Paul Erdös, and is an extended and translated version taken from  www.mathepedia.de.

We numerate the prime numbers in increasing order, i.e

Assume that the harmonic series of primes would converge. Then there would be a number m such that

and consequently, for any number N (which we will choose below).

Let us define now the "small prime numbers" to be {p1, p2, ...., pm} and the "large prime numbers" to be all others.
Further, let NS be the count of numbers ≤ N that have only small prime factors (in the above sense) and let NL be the count of numbers ≤ N that have at least one large prime factor. Thus
 NL + NS = N

We observe that [N/p] (with [x] denoting the integer part of x) is the number of multiples of p smaller or equal N and therefore

To estimate NS, we write any number n that is made up of only small prime factors as
where an is the product of all square free prime factors and bn2 be the product of quadratically occuring prime factors. (An example: for n=2400, an would be 6, bn would be 20).
In an, any small prime number occurs either with an exponent of 1 or 0. That is, there are at most 2m possibilities for an. For bn, we obtain bn ≤ √n ≤ √ N that there are at most √ N possibilities.
NS ≤ 2m √ N
on the other hand, due to NL< N/2, we have NS > N/2.
When we choose N (which is still free to be chosen) as N= 22m+2, we obtain that
NS ≤  22m+1 < NS ,
a contradiction. Therefore, the assumption "The series of reciprocal primes converges" must have been wrong. 

My Three Reasons To Leave a Paradise

The last four years I have rented a summer apartment in an old post station at one of Austria's most beautiful lakes - Lake Attersee. Gustav Mahler resided four years from 1893 to 1896, just nearby. Most in his small composer's cottage.

He once said to a friend: "No need to look there any more - that`s all been used up and set to music by me".

A few days ago, my wife and I decided to give the apartment up and last weekend we moved our belongings back to Linz. The collage above gives an impression of this last day in paradise. 

We enjoyed so many exciting and inspiring stays there.

Hiking, swimming, reading, working on critical concepts and plans...getting the catch of the day from the fisherman at our boat house, among them the rare, delicious lake chars living a meager life in 70m depth…

It is so quiet there, the views are so stunning, the woods are greener, the trees higher, the water clearer, the sun brighter, the sky bluer…of course.

Why? - asked our friends surprised
  1. I like to explore new places
  2. I like to travel
  3. I want to avoid that a place becomes "a shadow of my mind"
When this post is published, I'm heading to Cormons, Friuli, IT. I'll visit Aquila d'Oro at the Castello di Trussio, Dolegna - one of my favorite restaurants… I haven't been there for four years.

I want to fight my worst enemy: happy with a routine. The Attersee impressions have been set to some ideas... Time to become a free time nomad again.

No Chief Executive Quant on Board?

RBS has an excellent quant team. They introduce(d) innovative solutions, explain(ed) how they work at conferences, open workshops...and describe(d) them in books. What they recommend(ed) is widely copied in the quant finance circles…

But the bosses?

Before the 2008 collapse RBS was briefly the largest bank in the world…subsequently, RBS fell sharply in ranking, lost confidence and needed significant support from the UK government. They and their bosses were in the bad news...

We know it, the Lehman earthquake grew to a financial tsunami..

But still, did the management not listen to the quant team? Ignore them? Were the new products inside their investment banking just a mystery to them? Some say, they micromanaged the wrong things, see Braveheart banking; the fall of RBS.

I'm not a management expert, but I had a lot of bosses myself, before I started up my own business.

We all hate our bosses, right?

They always let us do the hard stuff? They just harvest our great output?

I never felt that way…and I did a few hard jobs: I cleaned the slag gutter of a blast furnace, arbitrated bulky scrap for input into a steel mill, harvested tobacco…in hard but above medium wage summer jobs.

The bosses enabled my full time studies. No reason to get mad on them.

Work hard to become a managing mathematician?

Later, I became a boss myself...responsible for a hundred people developing factory automation software. I reporting to the C level…It was an exciting time. Our own CNC machine and robot programming systems with operation and tool lifecycle management, shop floor control…intelligently combined with inlicensed CAE, resource and production management systems…ran in automated factories of renowned discrete manufacturers.

They were work of talented engineers, mathematicians, physicists, computer scientists…obviously we applied quantitative theories.

But in the late 80s, the C level managed a dramatic downturn of the entire enterprise and got fired completely. I got a new boss. A bureaucrat managing in the sense of "nobody has been ever fired for buying IBM"...

I quit…but I left the work without any bad feeling. It was a great time. I felt, like an entrepreneur in a large, old firm (actually, I started with a group of three)…and stared up my own business.

I don't know any CEQ

in a financial institution that is not part of the entrepreneurship.

In My Life as a Quant, Emanuel Dermal relives his exciting journey of a high-energy physicist becoming a managing director...he worked with Fisher Black at Goldman Sachs...and they were celebrated for their models and methodologies and they enjoyed working in a collaborative environment. They were kind of entrepreneurs in a large, old firm.

This was in the infancy of quaint finance, there were not so much proven and affordable technologies available.

But, discussing in quant finance forums, I'm surprised that

Reinventing the wheel

seems to be still attractive.
I want to create a FinancialEngineering library with generic financial engineering functions   throughout the various models and asset classes. Create a parent class in C++...?
was a question at a home page Serving the Quant Finance Community>>Programming and SW Forum.

Really? Was the first reply, but then the discussion went into details of C++ 11, modern C++ design…

But, there's great technology available

Obviously, it's not only us who can say: We spend years developing. Carefully choosing the mathematics. Mapping every practical detail. For pricing and calibration. For derivative and risk analytics. For structuring. For portfolio across scenario simulation…thousands of practitioners test our technologies on a vast variety of deal types, valued hundreds of billions of USD on a daily basis…

Quantitative managers optimize market risk?

They empower quants becoming a new generation of quantitative managers. Do on a much higher level what renowned quants did in the earlier days of quant finance?

You can't manage and do the plumbing. But you also can't be a quantitative manger without knowing the theories, methodologies and technologies either. To do one thing for your financial institution: optimize risk.

This would qualify for a C Level position?!

Back to factory automation. There's a vast variety of great technology available now. It's not economically feasible at all to build your own computer aided manufacturing system...from scratch, now.

It was never so easy…

RBS seems to have an insight sales strategy…RBS Insight…but do they have a CEQ?

Description of term structure movements using PCA continued

In my last blog entry How good is the description of term structure movementsusing PCA a lot of open questions remained. Today I want to give first answers...
 - How good is the description of interest rate movements using only a few factors?
We assume, that we have a time series of  yield curves , where each of them is given on 16 curve points (1W,3M,6M,9M,1Y,2Y,3Y,4Y, 5Y,7Y,10Y,15Y, 20Y,25Y, 30Y,50Y). Calculating the principal components ei, based on daily interest rate movements, the increments of the yield curve dr =(dr1,…,dr16) can be exactly described using the formula

 where (.,.) is defined to be the inner product of two vectors. The following pictures show, how good an arbitrary chosen interest rate increment (blue curve) can be approximated using only 4 (left), 5 (middle), 6 (right) factors, i.e.

The table below shows, how many percent of the variance of daily, weekly and monthly historical interest rate movements can be described using only a few PCA factors:


Using a time series of daily EUR interest rate movements, the following picture shows the variation of the original data (left) and the remaining variation (right) after the filtration of the first four principal components. One can see, that on average about 1 basis point of the interest rate movements remain unexplained.


So, using a few principal components for the description of interest rate movements, leads to a good approximation of the original data. Furthermore, combinations of principal components produce  realistic yield curve scenarios, which can be used for the calculation of interest rate risk measures of instruments and portfolios.