The first thing I did (in a small team) in my first job after my technical mathematics studies in the mid 70s: migrate an APT system from the IBM mainframe to a General Automation mini computer - the first world-wide.
APT stands for Automatically Programmed Tools a high-level programming tool used to generate instructions for numerically controlled machine tools. APT has been created at the MIT in 1956.
It was clear that each APT program needed to run on the GA as on the IBM - no subset. APT compilers, interpreters and post processors (generating the control code for the concrete machine tools) were written in FORTRAN and different from those used in the IBM APT (because of limited resources on the GA, but also to apply own ideas of geometric modeling…).
Was it innovative?
Later, we introduced a new language that was much more feature and task oriented…however, it created the same constructor…the control programs carrying out the task.
The paradox of copying
Jorge Louis Borges, wrote a great short story "Pierre Menard, Author of the Quixote". Menard, a fictive character, did not compose another "Quixote", he produced a version that is re-written word by word. In this story, irony and paradox generate ambivalence. Menard's copy is not a mechanical transcription, it coincides with Miguel Cervantes' Quixote…
(Borges, Quixote) is different from (Menard, Quixote), because of "knowledge". I think Borges states through the paradox of Menard: all texts are a kind of rewriting other texts. Literature is composed of versions? The paradox of Menard is pushing the limits to the absurd and impossible, but it is about the principles of writing...
However, Menard's version would become more "different" if he offered a complete thorough Quixote course, a reading tour, a blog, a magazine, "how to write Quixote alike books" workouts…
The Workout in Computational Finance
What if someone rewrote Adreas' and Michael's great book that explains that and why a thorough grounding in numerics is indispensable for evaluating the pricing and risk models correctly and implement them in high quality. The rewritten would be be different.
The book represents knowledge of the UnRisk Academy that was established to disseminate this knowledge. It offers online and life seminars, workouts…and the real transformations made in response to the feed back of hundreds of practitioners who use UnRisk to carry out their tasks.
It's knowledge and its dissemination forms that innovativeness. Constructed and Packaged.
A Tree's a Tree
In a recent blog post, Andreas asked the question if the harmonic series of prime numbers converges. In a later blog post he sketched a proof. Do mathematicians ever move beyond the sketch stage with their proofs?
Andreas could have saved a lot of time by just typing in the following code into Mathematica. It uses the Prime function which gives the nth prime:
Case closed.
In that vein, all series problems can be answered with a quote by Ronald Reagan: “A tree’s a tree. How many more do you need to look at?”
Constructor Theory - A New Fundamental Theory of Physics
You may have observers that there is not so much physics in UnRisk Insight currently. The simple reason: Michael works hard to transform some new ideas into programs swiftly. For counterparts risk valuation. They are of eminent practical relevance, and were triggered at a recent workshop with Solventis, here in Linz.
There is no such thing as an abstract program is one of the basic insights of a new fundamental theory of physics the constructor theory, developed by David Deutsch, Chiara Marietto…Oxford Univerity.
I am a lousy physicist, but I dare to write a little about this theory, because I found one example that I (hopefully) understand.
Robot control
You can write an offline, task oriented robot program but its constructor is the robot control. It's the entity that carries out the given task ("..pick a part of the box, put it on the palette...") repeatedly. The robot control is the foundational element - the constructor.
The robot control uses models that are calibrated and constantly re-calibrated to the real working space and situation. It may need sophisticated feature recognition...
Tasks
In constructor theory, a transformation or change is described as a task. A constructor is a physical entity which is able to carry out the task repeatedly. A task is only possible if a constructor is capable of carrying it out.
It sounds so simple, but it goes beyond Popper's science theory of falsification, because it touches information, computation and knowledge on a fundamental level. If we, for example, think of the idea of entropy in a thermodynamic system the link to information is strong…(oh, I'm already on icy terrain)
I take the practical view: there is no such thing as an abstract program…
In mathematics, BTW, there is no theorem without a model and a theorem comes to life only based on its operational semantics - the evaluation, the computation...
However one try: If I understand it right knowledge can be instantiated in our physical world and the better the instantiation the better the knowledge. This sounds quite evolutionary?
The evolution of the option theory
In the introductory book Quantitative Methods for Financial Markets (for students!), Andreas wrote: "the principles of risk-neutral valuation transforms the market into a 'fair game'". This rule has been instantiated by the BS formula by 1987. But, with the introduction of far out of the money options the smile was explored.
In the following, increasingly complex option models were/are introduced - among them models that cannot be validated (impossible to calibrate and re-calibrate..).
In the sense of the constructor theory, the task they represent is "impossible". Too complex models are a fundamental trap.
How to avoid them is not easy, because you need to know in depth, where the computational limits are. And the borders are moving...
There is no such thing as an abstract program is one of the basic insights of a new fundamental theory of physics the constructor theory, developed by David Deutsch, Chiara Marietto…Oxford Univerity.
I am a lousy physicist, but I dare to write a little about this theory, because I found one example that I (hopefully) understand.
Robot control
You can write an offline, task oriented robot program but its constructor is the robot control. It's the entity that carries out the given task ("..pick a part of the box, put it on the palette...") repeatedly. The robot control is the foundational element - the constructor.
The robot control uses models that are calibrated and constantly re-calibrated to the real working space and situation. It may need sophisticated feature recognition...
Tasks
In constructor theory, a transformation or change is described as a task. A constructor is a physical entity which is able to carry out the task repeatedly. A task is only possible if a constructor is capable of carrying it out.
It sounds so simple, but it goes beyond Popper's science theory of falsification, because it touches information, computation and knowledge on a fundamental level. If we, for example, think of the idea of entropy in a thermodynamic system the link to information is strong…(oh, I'm already on icy terrain)
I take the practical view: there is no such thing as an abstract program…
In mathematics, BTW, there is no theorem without a model and a theorem comes to life only based on its operational semantics - the evaluation, the computation...
However one try: If I understand it right knowledge can be instantiated in our physical world and the better the instantiation the better the knowledge. This sounds quite evolutionary?
The evolution of the option theory
In the introductory book Quantitative Methods for Financial Markets (for students!), Andreas wrote: "the principles of risk-neutral valuation transforms the market into a 'fair game'". This rule has been instantiated by the BS formula by 1987. But, with the introduction of far out of the money options the smile was explored.
In the following, increasingly complex option models were/are introduced - among them models that cannot be validated (impossible to calibrate and re-calibrate..).
In the sense of the constructor theory, the task they represent is "impossible". Too complex models are a fundamental trap.
How to avoid them is not easy, because you need to know in depth, where the computational limits are. And the borders are moving...
Archplot - The Story Structure for a Life as a Quant?
Since I've posted why quants should tell more stories, I wanted to know much more about "storytelling". Fortunately, I found The Story Grid.
Stories have to do with lives and when I asked no CEQs on board? I had Emanual Derman's story "My Life as a Quant" in mind and how the situation (and stories) of quants have changed.
I learned that a story has a style, a structure and a substance and in relation to a life the structure is the most import criterion, IMO. It is about the plot.
Archplot. Miniplot. Antiplot
build the story triangle in R. McKee's view.
Archplot is the classic story structure. It features a single protagonist. The lead character pursues an object of desire (an advanced risk management process?), confronting external forces (a strategy, project roles, a management principles…). The story ends with an irreversible change in the life of the protagonist. It's causal, real and linear..
Archplot is human life story. As humans we may find radical change to be difficult, but we want the protagonist to change from the beginning to the end. We want characters taking myriads of challenges...
Miniplot characters struggle with their inner demons, move through the world avoiding external confrontations. They're passive not active. Inside they fight for their life. Miniplot usually offers "open" ends.
Antiplot fights the story itself, it breaks all rules. No requirement for causality, nor a constant reality, no time constraints and the protagonists are the same at the end of the story. They never fight any forces. They just remain as they ever were.
Choose the Archplot form
Pursue the objective of becoming a CEQ, saving the life of your financial institution, managing the transformation of your knowledge into margin.
We may be able to serve you.
Stories have to do with lives and when I asked no CEQs on board? I had Emanual Derman's story "My Life as a Quant" in mind and how the situation (and stories) of quants have changed.
I learned that a story has a style, a structure and a substance and in relation to a life the structure is the most import criterion, IMO. It is about the plot.
Archplot. Miniplot. Antiplot
build the story triangle in R. McKee's view.
Archplot is the classic story structure. It features a single protagonist. The lead character pursues an object of desire (an advanced risk management process?), confronting external forces (a strategy, project roles, a management principles…). The story ends with an irreversible change in the life of the protagonist. It's causal, real and linear..
Archplot is human life story. As humans we may find radical change to be difficult, but we want the protagonist to change from the beginning to the end. We want characters taking myriads of challenges...
Miniplot characters struggle with their inner demons, move through the world avoiding external confrontations. They're passive not active. Inside they fight for their life. Miniplot usually offers "open" ends.
Antiplot fights the story itself, it breaks all rules. No requirement for causality, nor a constant reality, no time constraints and the protagonists are the same at the end of the story. They never fight any forces. They just remain as they ever were.
Choose the Archplot form
Pursue the objective of becoming a CEQ, saving the life of your financial institution, managing the transformation of your knowledge into margin.
We may be able to serve you.
The Trick Is To Speak For The Project
I am a marketer at heart. But my trick is to speak for the UnRisk project.
Projects…things to be created, financed and shipped. Sometimes they influence a life, other times, they fade. UnRisk influences my business life.
In the later 90s I helped getting a contract from a London based trading desk of an American bank: pricing of sophisticated convertible bonds.
Lucky for me, cooperation shifted from a one time cooperation to long-term affiliation in an exciting project. UnRisk.
It's different building a consortium from conducting someone else's project - you jointly get the idea, see an outcome, share a vision, build the technology, build the tools, plant the seeds for growth, are selected or rejected, your clients shape you and your ideas, the tools build you, you identify your "dream client"and "dream partner", you refine your brand promise, you stop listening to focus groups only, you know the financial impact of your decisions, you get the cash flow right…you reinvent your technologies and tools…
UnRisk, as Andreas pointed out in his post yesterday, has many faces.
I'm proud that it matters, that it's different in many aspects, that we got out of the niche very early, that it has a bright future…I'm part of the project.
The trick is to represent the project.
Projects…things to be created, financed and shipped. Sometimes they influence a life, other times, they fade. UnRisk influences my business life.
In the later 90s I helped getting a contract from a London based trading desk of an American bank: pricing of sophisticated convertible bonds.
Lucky for me, cooperation shifted from a one time cooperation to long-term affiliation in an exciting project. UnRisk.
It's different building a consortium from conducting someone else's project - you jointly get the idea, see an outcome, share a vision, build the technology, build the tools, plant the seeds for growth, are selected or rejected, your clients shape you and your ideas, the tools build you, you identify your "dream client"and "dream partner", you refine your brand promise, you stop listening to focus groups only, you know the financial impact of your decisions, you get the cash flow right…you reinvent your technologies and tools…
UnRisk, as Andreas pointed out in his post yesterday, has many faces.
I'm proud that it matters, that it's different in many aspects, that we got out of the niche very early, that it has a bright future…I'm part of the project.
The trick is to represent the project.
Birds Found Using Human Musical Scales…
is the title of an article in "Science".
...harmonic series—that is, the pitches of the notes follow a mathematical distribution known as integer multiplesAmazing. Maths everywhere. I've found the link in Marginal Revolution.
UnRisk User Preferences
UnRisk has quite a few different faces: UnRisk FACTORY with its web interface, UnRisk ENGINE with Excel, UnRisk Q with Mathematica and the the UnRisk library that lies behind all these and which is used by the UnRisk development team.
The UnRisk user community is quite heterogeneous: There are UnRisk users coming from accounting or controlling, there are quantative analysts, risk managers, treasurers, traders.
And they all have their preferred ways to work.
With UnRisk FACTORY 5.2. and the UnRisk Excel link for the UnRisk FACTORY, we have closed the gap between two widely used interfaces and thus reduced possible sources of errors in communication.
Thanks to the development team!
The UnRisk user community is quite heterogeneous: There are UnRisk users coming from accounting or controlling, there are quantative analysts, risk managers, treasurers, traders.
And they all have their preferred ways to work.
With UnRisk FACTORY 5.2. and the UnRisk Excel link for the UnRisk FACTORY, we have closed the gap between two widely used interfaces and thus reduced possible sources of errors in communication.
Thanks to the development team!
With People Like Us?
First, I wanted to follow up Michael's New Release post directly, but then I read this in Seth's Blog about selection strategies…and combined...
Do you want to work with people like us? Our track records are characterized by achievements in mathematics and computer science and our business skill set has been developed on the job.
The selection criteria for a technology always include "who". Names, track records, skill set, provenance, financial stability, market presence…
Not with people like you, may some business professionals say…you are mathematicians, but we need to do real business…
Not with people liker you, may some mathematicians say…you are transforming mathematics, a culture technique, into margins…
With people like you, say those, who care…you provide know how packages and respond to our requirements swiftly…
It was never so easy to connect globally and find the right partners for learning, developing, marketing...but traditional thinking let us still cling to preferences for neighborhood or major places, known cultural background…or scale?
I've maybe said it too often, but unleashing the programming power behind UnRisk is our chosen path for growth. It's result of long term (mathematical) thinking. It's our approach to risk optimization. Moderate growth in a constant feed back loop.
Quantsourcing empowered by UnRisk technology stack
Our offer does not only include a technology license and development partnership, it includes a brand name, a marketing and sales approach, a promotion mix…a business development partnership.
Our technology stack combines the Unrisk Financial Language implemented in UnRisk gridEngines for pricing and calibration, a portfolio across scenario FACTORY, a VaR Universe, the UnRisk FACTORY Data Framework, UnRisk Web and deployment services and since yesterday an Excel Link that does not only link to the PRICING ENGINE, but the FACTORY. End of 2014 an engine with emphasis on counter party risk valuation will be available.
Don't start from scratch, our technology stack and products are amazing…and working with us is not too bad.
Do you want to work with people like us? Our track records are characterized by achievements in mathematics and computer science and our business skill set has been developed on the job.
The selection criteria for a technology always include "who". Names, track records, skill set, provenance, financial stability, market presence…
Not with people like you, may some business professionals say…you are mathematicians, but we need to do real business…
Not with people liker you, may some mathematicians say…you are transforming mathematics, a culture technique, into margins…
With people like you, say those, who care…you provide know how packages and respond to our requirements swiftly…
It was never so easy to connect globally and find the right partners for learning, developing, marketing...but traditional thinking let us still cling to preferences for neighborhood or major places, known cultural background…or scale?
I've maybe said it too often, but unleashing the programming power behind UnRisk is our chosen path for growth. It's result of long term (mathematical) thinking. It's our approach to risk optimization. Moderate growth in a constant feed back loop.
Quantsourcing empowered by UnRisk technology stack
Our technology stack combines the Unrisk Financial Language implemented in UnRisk gridEngines for pricing and calibration, a portfolio across scenario FACTORY, a VaR Universe, the UnRisk FACTORY Data Framework, UnRisk Web and deployment services and since yesterday an Excel Link that does not only link to the PRICING ENGINE, but the FACTORY. End of 2014 an engine with emphasis on counter party risk valuation will be available.
Don't start from scratch, our technology stack and products are amazing…and working with us is not too bad.
UnRisk FACTORY 5.2 Released: Closing the FACTORY - Excel Gap
Today we have released Version 5.2 of the UnRisk FACTORY.
By combining the following two technologies
- UnRisk Web Service: enables our users to import data from the UnRisk FACTORY database into Mathematica
- UnRisk PRICING ENGINE: enables our users to use all of the UnRisk functionality from within Excel
our users have now the possibilities to import data from the UnRisk FACTORY database directly into Excel - without having the need of .csv files or database views.
These data, e.g., may be:
- Market Data
- Calibrated (automatically within the UnRisk FACTORY) interest rate models
- Valuation Results of individual instruments and portfolios
- VaR Results of Portfolios including the contribution VaRs of the underlying instruments
In addition this new functionality allows us to offer the following service to our customers:
If the customers wants to see information in a certain way, which is not part of the basis functionality of this, let's call it, "UnRisk FACTORY for Excel Link", we can easily implement this new functionality within days and in most of the cases without extra costs for the customers.
At the end of this post I give a small example of such an extension:
The user wants to know
"What are the aggregated expected cashflows of the instruments from my portfolio for a list of given date intervals."
The implementation, which consits of 12 lines of Mathematica code, of the corresponding function took me around 45 minutes. The main steps are:
- Extract the valuation results of the portfolio
- Loop over all underlying instruments and extract the expected cashflows
- Aggregate the expected cahsflows for the given date intervals
Here is a screenshot of the output in Excel:
Can we Learn From Vampires?
This question is raised by Freaconomics in its newest radio podcast - the transcription can be read here.
Immortal, unconstrained mobile and absolutely wise
Freakonomics likes the idea of timelessness, unconstrained mobility and the absolute wisdom. But then they question the economic side…
Jim Jarmusch made a great film about vampires: Only Lovers Left Alive. A quiet and dark film with a feeling of timelessness…giving the impression that any world is important. The two immortal lovers show us the highest culture of absolute wisdom, connectedness…
But, how immortal and wise vampires ever are, they are caught to live at night, buy (at dark markets) or steal blood…whatever constraints they have removed, they are stuck to one rare resource…to get it they even risk to transform others into vampires and create competition...
In the film the lovers are close to die of hunger…not enough energy left to do what they need…in the last second they found the perfect victim…
Only the imperfect diversify…and live?
The spotlight of the Nov-14 issue of the HBR Magazine is "Internet of Everything"
We strive for understanding and knowing everything. The phrase "internet of things" has arisen to highlight new opportunities exploiting new smart, connected products transforming data into knowledge.
But isn't absolute wisdom also absolute boredom? Isn't 'uncertainty good? Remember, we only learn from turbulences and gain from disorder.
What are we going to do, if the data tell us everything? Will data become to us then the blood of the vampires? Will the vampires ever get a free market of real blood...will we get a free market of informative data?
Co-eveolution in the programming grid
The internet of everything will help to establish a co-evolution of, say, weather forecasting and energy optimization...but for finance and economics we should not forget modeling, parameter identification, simulation…speculation and verification.
IMO, we need co-evolution at another level: co-program for new insight. Let our breakthrough explore new problems at a higher level…let us find abstractions from applying examples…and share ideas and skills.
Immortal, unconstrained mobile and absolutely wise
Freakonomics likes the idea of timelessness, unconstrained mobility and the absolute wisdom. But then they question the economic side…
Jim Jarmusch made a great film about vampires: Only Lovers Left Alive. A quiet and dark film with a feeling of timelessness…giving the impression that any world is important. The two immortal lovers show us the highest culture of absolute wisdom, connectedness…
But, how immortal and wise vampires ever are, they are caught to live at night, buy (at dark markets) or steal blood…whatever constraints they have removed, they are stuck to one rare resource…to get it they even risk to transform others into vampires and create competition...
In the film the lovers are close to die of hunger…not enough energy left to do what they need…in the last second they found the perfect victim…
Only the imperfect diversify…and live?
The spotlight of the Nov-14 issue of the HBR Magazine is "Internet of Everything"
We strive for understanding and knowing everything. The phrase "internet of things" has arisen to highlight new opportunities exploiting new smart, connected products transforming data into knowledge.
But isn't absolute wisdom also absolute boredom? Isn't 'uncertainty good? Remember, we only learn from turbulences and gain from disorder.
What are we going to do, if the data tell us everything? Will data become to us then the blood of the vampires? Will the vampires ever get a free market of real blood...will we get a free market of informative data?
Co-eveolution in the programming grid
The internet of everything will help to establish a co-evolution of, say, weather forecasting and energy optimization...but for finance and economics we should not forget modeling, parameter identification, simulation…speculation and verification.
IMO, we need co-evolution at another level: co-program for new insight. Let our breakthrough explore new problems at a higher level…let us find abstractions from applying examples…and share ideas and skills.
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