UnRisk Insight: 2009

Wood-Wide-Web

I just returned from a 5 days vacation: cross country skiing at Ramsau-Dachstein one of the cross country skiing centers in Austria. I have been there in summer time, as well, and hiking through the woods I found baskets full of fungi (especially chanterelles and ceps).

And it came to my mind that some of the fungi live for-and-from special wood-wide-webs (common mycorrhizal networks), where plants and mycorrhizal fungi are linked to transfer, say, carbon-hydrates and minerals.

Research suggested that plants could facilitate the growth of other plants, which could play an important role in seedling establishment, forest succession, and other plant-plant interaction. (see MykoWeb )

In Disrupt Or Re-Invent Ourselves I mentioned our new mission: closing the customer feed back link by transferring know how. Is it the typical New-Years intent?

No, 2010 will be the year of intensifying our know-how packages business. We are highly committed to building common quantitative finance networks with our customers - for mutual development and growth, open innovation and networking will become our business principle.

A Pocketful of Experiences

it was a year of tough lessons and, as Dan Tudball writes in his Editor's Letter, Wilmott magazine Nov-09, getting back on the old horse for some ...

Not for us. In Disrupt or Reinvent Ourselves I wrote about our transformation to a know-how packages deliverer.

Step Across the Border

is the title of an experimental-music film and CD from the music professor Fred Frith ( I mentioned it in Nowhere to Run ).

The following miniature Morning Song by the Czech musician Iva Bitova is from this film.

This article in the Dec-09 HBR is about the benefits of companies intra-competition cultures (traders and investment bankers would not share ideas, but compete for business), concluding the biggest predictor of performance is complacency; conflicts can shake things up and boost creativity.

A good future-facing fight speaks to what is possible. I like this. It connects organisations and people.

Nowhere To Run?

Amazon frequently reminds me that I have bought some obscure music and there is something that fits to the patterns. Yes I like Fred Frith's Step Across The Border and they offered me Nowhere Fred's sixth CD for music of dance. With pieces like Nowhere to Hide, Going Nowhere and Nowhere to Run.

For tall buildings you need tall cranes. This impressive crane is not tall enough to maintain the Centre Point in London. But, the principle construction of the crane looks to me configurable from parametric building blocks.

Computers give us even more flexibility for parametric design.

This weekend my wife and I made a lightning-visit to London. We dived into the shopping-parades, like at Regent Street, but most important visited our favorite small spot for arts, the Serpentine Gallery at Kensington Gardens. Current exhibition: Design Real, curated by Konstantin Grcic, one of the world's leading industrial designers. As the title of the exhibition suggests, all of the selected products are 'real', mass produced items that have a practical function in everyday life. Grcic: good design admits to the deeper insight that beyond performing a purpose in a good way, the purpose itself has to be good.

300

No, I do not recommend this "phantasy" movie about King Leonidas and his 300 Spartan Warriors.

Seing the trailer, I just remembered that the Battle of Termopylae, has been an integral part of the curriculum in my high school, and I am sure many others.

It is believed from mythology, that Leonidas and 300 (risk-trained) Spartan warriors were the dominant force of a Greek army of between 5000 and 7000 strong to hold the pass of Termopylae against the massive Persian army under Xerxes.

Risk aspects: the oracle of Delphy has warned Leonidas that either Sparta would be destroyed or he would lose his life. The pass was chosen with care. The Greeks were armed with long spears to prevent persians to getting close with their weapons. After they have repulsed the attacks for the first days an unexpected risk was caused by a Greek traitor, who showed the Persian a path around. Knowing that they will be outflanked, Leonidas sent away all Greek troops, because he cared about their safety to preserve them for future battles (only 900 Helots and 700 Thespians stayed).

They finally were cut down, but saved Sparta and in the following Athens and Greece.

Away from weapons, wars ... what we want to do for risk management: provide powerful technology optimized for certain usages ( a clever handful is enough ) in a minimalist infrastructure, giving in-time decision support. A system that is widely usable (even from smart mobiles) , act powerful and robust where required and collaborate with the surrounding systems. And we train risk experts.

Disrupt Or Re-Invent Ourselves?

How vulnerable is our business? As vulnerable as that of the market participants in our market segments.

For years, we were in the given-a-problem-searched-a-solution innovation business. In modeling and simulation of complex technical systems.

Work and Knowledge - Wellsprings of Our Lives

compiled from Wilhelm Reich.

Today, we have launched UnRisk Academy, a new business unit that will package and transfer know how.

The Risk Analytics Factory

In Wired Nov-09, I read under World's Biggest Digital Brains that those, with names like Blue Brain, Discover, Ranger, .. are able to handle "many" teraflops, studying the inner working of the human brain, climate simulations, .....: Number of processors up to 16.000 for 500 Teraflops.

In Finance?

You cannot predict extreme events. Studying the past will also not help to manage all risk. You need to ask What-If, Provided-Then, .. questions?!

Simulate deals across comprehensive scenarios can become heavy within a bank, not to speak about market segment, sectorial analysis, .. Such simulations are not performed, because of technological limitations.

A portfolio of 1000 moderately complex structured instruments (average valuation time 10 sec) across 10.000 scenarios would take more than 3 years on a single core process. To get the result in 10 seconds, a speed up of 10 Million was required.

Can we imagine to set up affordable risk-answering-factories with such a performance?

First, kernel sw would need to take its part, say, by doing principle component application , surrogate models. Speed-up of 1000. Still 10.000 to do.

Put part of the valuations on a Personal Supercomputer from NVIDIA (quad-core machine plus GPUs), and you can get a speed-up of approx.100.

Still 100 to do. With the help of Mathematica's symbolic parallelization techniques, we have made UnRisk grid-enabled and optimized for close to linear speed-up related to the available core processes. Provided, we take a networked pool of 128 core processes. 32 Tesla personal Supercomputers for the job?!

Luckily, we have selected the right algorithms and technologies to multiply speed-up. NVIDIA implementation to come next. And yes, it is possible.

If UnRisk was a Bike

it was most probably a YikeBike . It is rated one of the best 50 inventions of the year 2009 in Time magazine. YikeBike says: YikeBike is a statement about using smart technology to solve the problems of our increasingly congested, polluted, stressful cities.

In this case I relate it to our UnRisk-Q the quant-computing-and-developing system that packs the latest technologies into a minimalist infrastructure of a supercomputer-under-a-quants-desk. Shhh on NVIDIA Tesla. As YikeBike to be available in Q2 2010.

Main And Wall

are never going to love each other? (from am article in Time magazine, November 9, 2009). Meaning Main Street and Wall Street, synonymous for real economy and financial markets.

IMO, they are tightly bound to each other since we have instruments as media for asynchronous economic transactions: when Main has an idea but no liquidity or Main has liquidity but no idea, Wall shall have an answer.

Both interplay in good balance if their innovativeness balances well?

Made To Measure

No, this is not about the collection Made to Measure of the Belgian record label Crammed Disk. But it would be worth to mention the renowned artists having worked with musicians who contribute to the MTM collection: Jim Jamusch who produced the filmmusic to one of my favorites "Down By Law" (MTM 14), to name one.

However it is about intersections and interplay of art books, films, .. with music.

UnRisk FACTORY 2 Released. Quick after UnRisk 4

9-Nov-09, UnRisk took UnRisk FACTORY 2 to financial institutions for enterprise-wide real-time pricing and risk analytics strategies. Ten days after the release of the UnRisk PRICING ENGINE 4, FACTORY 2 incorporates all its new deal types and features, like expected coupon rate and survival probability calculations.

In addition to the new UnRisk 4 deal types, models and utilities, advanced filtering, automatic generation of all kind of schedules, user defined result aggregation all leading to highly automated tasks, UnRisk FACTORY 2 introduces visualization.

The Brave And The Bold

Harvard Business Review Article: Managing Risk in the New World; Has the development of tools for assessing risk lulled people in believing risk is now easier to control?

UnRisk 4 Rolls Out with Multiple Computation Kernels

27-Oct-09 – we have released UnRisk PRICING ENGINE version 4, introduced as UnRisk 4.

Penguins in Bondage?

After having published the Vanilla building post, I saw the march-of-the-penguins photo. And I thought, are those two trying to change direction?

However, most change initiatives fail.

Yes, since the beginning of the crisis markets have shifted to new regimes, characterized by almost unimaginable anomalies. It has exposed failures in risk management and even familiar models and valuation techniques became unmasked as unreliable.

8-Oct-09, the Risky Horror Show was exciting for us, and, I believe, for the participants.

Paul Wilmott traveled around the world and gave many interviews for the most reputable media giving insight in why the risky horror occurs. Paul is really one of the most influencing quants.

Risky Horror Show

Our Model&Method Risk seminar will be presented at Wilmott Finance Focus:

Thursday, 8th October 2009

Commencing at 6.30pm
Venue: 7city Learning, 4 Chiswell Street, 3rd floor, London

Speaker: Andreas Binder, head of the UnRisk maker Mathconsult

Unrest?

This is not a review about "Unrest" a CD from "Henry Cow", an avant-garde-music group of the late 60ies founded at Cambridge University by multi-instrumentalists Fred Frith and Tim Hodgkinson, joined by some of my favorite musicians Chris Cutler, Lindsay Cooper, Dagmar Krause, ..

Because We Are Nice,

don't think we are stupid.

Our customers know it well, but prospective users often cannot believe that our licensing/pricing does not hide anything in the-small-print.

Algorithmic Architecture

In If UnRisk was a Tall Building I thought of similarities of designing-for-usability-stability-robustness in architecture and software. When Lake Point Tower uses the triangle core which holds all weight, UnRisk uses a numerically optimized C++ kernel to hold all heavy computations. Its universal interface is represented in Mathematica. See The UnRisk Langage a language about derivatives, structures and other financial objects and their valuation.

To tree or not to tree: trinomials

We have seen in a former blog article that binomial trees may lead to oscillating solutions and even to heding parameters of the wrong sign arising from these oscillations. Therefore, trinomial trees were invented and are still widely used for short rate models like Hull-White or Black-Karasinski.

As I am not a well-known tree-addict, the reader may expect some good reasons against trinomials.

The basic branching of trinomials looks like this

At each node there are three possible branches with probabilities p1, p2, p3 who should add up to 1. In contrast to the binomial model, the trinomial model is not a complete one leading to a unique price only from no-arbitrage arguments. Therefore, there is a certain arbitrariness to assign the probabilities to the different branches. The advantage of this arbitrariness is that it is fairly easy to obtain recombining trinomial trees.

When we think of a (mean-reverting) Hull-White model, the nodes and the probabilities are typically chosen in such a way that the expected value of the short rate (at the next time step) and its variance fit the analytic values available for these. If a node is too far away from the mean reverting level, this has the consequence that the one of the branches would be assigned with a negative probability leading necessarily to severe oscillations as the explicit scheme is not stable any more.

Therefore down-branching and up-branching are used for trinomials in mean reverting models.

So what?
Well, down-branching and up-branching cuts off certain parts of the calculation domain and therefore leads to wrong values even for the most easy instrument, a zero coupon bond. Yes, certainly you can fiddle around and stretch your calculation tree in such a way that you meet the discount factors again. But if you do this, you never ever can use analytic formulae for bonds, options or CMS rates any more. It would be much much easier if you had a consistent and stable numerical scheme which does not change your model.

And yes, there is one: Finite elements with proper treatment of convection (which is the reason for the stability problem) lead to much much better results.

Hidden In Plain Sight?

Begin of this week, we had our 2 days workshop with Solventis . We presented the upcoming UnRisk releases and Solventis compiled their experiences into future requirements.

UnRisk code: click to enlarge

Let's assume we want to price a European up & out call option with the following properties:- The

spot price of the underlying equity is 100 EUR and the continuous dividends shall are 1%

- The lifetime of the option is 1 year

- The strike price is 100 EUR

- The barrier is 120 EUR
As long as the barrier has not been reached the option stays alive.

Barcelona, much more than home of soccer champions

We are passionate about future technologies, but you might call us old-fashioned in our business principles. We want business-development partners who share our strategic-marketing view: responsiveness and transparency.

Shhh....UnRisk 4 and UnRisk FACTORY 2 coming

In about 6 weeks, we will take our new major releases to financial institutions.

It most probably was a Habanero, one of the most spicy species of chili peppers, which will rate approx. 300.000 Scoville units .

The Habanero's fruity flavor and aroma has led to an explosion of recipes and processed hot sauces.

Some have called it a designer-chili and "relatives" have been developed, which are the hottest of the hot. However, you can still enjoy the wonderful flavour of the Habanero by using less.

We Take Our Model & Method Risk Seminar to Banks

Our compact seminar was well accepted in several places. We have now decided to refine it and offer the following modules in form of 4-5 hours seminars each, on-site.

If UnRisk was a Fashion Design Shop

it most probably was that of Issey Miyake. He is known for his technology-driven clothing. In the late 80ies he began to experiment with new methods of pleating resulting in a new technique called garment pleating and a line Pleats Please.It is a radical form of contemporary clothing that combines technology, functionality and beauty. He continued to challenge the way in which new clothing is made using new proceses that harness computer technology to industrial knitting and weaving machines, producing tubes of cotton polyester stretch fabric. Garments to be cut customized on users. In a project titled A-POC (a Piece of Cloth). He works with a team of young designers.

Generic technologies for customization, this is what we like. And I wear IM with joy.

Booming Boutiques

Recently, I read (in Institutional Investor) Investment Banking: top bankers are fleeing big firms for independent advisory boutiques.

Risk Management a Management Risk?

Follow ups from the first Model&Method Risk seminars are exciting. It is all about the combination of valuation and risk management, better the parallelization in the work-flow with the objective of an early warning system. You cannot really think about the model risk of a valuation afterwards?!

Pricing with PDEs - What pitfalls you have to take care of I

After Andreas Binder gave insight to you that pricing financial instruments using trees can end with disaster I will show you in a multi-part blog that numerical methods for partial differential equations (PDEs) give you reliable tools for fast and stable pricing. How to choose the appropriate technique and what pitfalls you have to take care of will be discussed in detail.

UnRisk-Q High-Value at Low-Price

Recently, we took UnRisk-Q to the quant community. We made this by configuring and packaging our latest technologies of which our UnRisk product family is made. We decided to transit this benefit to the quant-finance developers. Price examples:

Again motivated by a Blog of E. Derman . Frogs like digging in the details, birds flying high have the overview. What does this mean to mathematical disciplines? Birds are interesting but wrong? Frogs are correct, but the details do not make a "picture"?

Shhh....Preparing Major Releases over the Summer

We have revolved and refined our short term development plans. Over the course of the next weeks, independent whether the weather becomes hot or not, we will conclude major developments and experiments on UnRisk's computational kernels as well as front-ends.

It most probably was the Lake Point Tower by the lake shore in Chicago. Based on a conceptual design by Ludwig Mies van der Rohe , built by Schipporeit&Heinrich.

Because of its height and location on the shore of Lake Michigan, the residential skyscraper had to be designed to withstand the high winds. At the center of the building is a triangular core, which contains 9 elevators and 3 stairways. This core also holds all the vertical weight of the building. Radiating from the core are three arms, which form an asymmetrical Y-shaped floor plan.

Due to the angles between the wings the units of LPT feature some stunning panoramic views over the city, but so that the apartments would not face each other. The design also offers less surface area exposed to direct wind loads. Consequently the building is more stable and generally safer.

It does much more than expected from a first view.

Not in the Toothbrush Business

Traveling back from Zurich, Andreas read about the trends in the financial markets, see FT and Convertibles, while I tried to get insight from other businesses. In the English issue of Wired the cover story was on "Inside Google".

Financial Times Germany and Convertible Bonds

Flying home from Zurich today, I came across an article in Financial Times Deutschland saying in the headline “Convertible bonds bring good luck”.

15-Jul-09, Zurich. Again, we had a sprited discussions with quant experts, who use already techniques, which are not so common in financial circles. For example the application of finite element (FE) techniques to solve complex models in their PDE form.

It Must be a Metrics? Risk ... ?

If you want to assess anything, you want to do this unbiased, thus you search for a metrics. And if it was building tick-boxes.

Are You ... ? You don't Look ... ?

As often I have a little time I read Emanuel Derman's Blog (as Paul Wilmott's and a few others). ED is one of the most influencing quantitative finance experts, author of My Life as a Quant. I like his special humor.

If UnRisk was a Ballroom Dance

It most probably was the Foxchatrot demo performed by Luca & Lorraine Barrichi.

Watch The Dance

They prove that it does not need heavy make-up, bells and whistles to dance in the most elegant and smooth way, reduced to the essence of dancing.
Their foxchatrot combines the best of several worlds: foxtrot steps and a jazzy version of Bali Hai.
At UnRisk we are also passionate about combinations from several worlds: Take Mathematica as a language, advanced numerical techniques proven in reactor modelling and treat your customers as if you had to dance with them.

To Tree or Not To Tree

Binomial trees are perfect. Well, the Cox-Ross-Rubinstein One-Level Model is perfect to introduce the concept of a risk-neutral measure, which is (and was also not for me) not easy to understand for beginners. When there are no dividends, constant interest rates and constant volatilities, then N-level binomial trees recombine.
Recombining N-level trees need little storage and are easy to implement, even for instruments with early exercise rights. If done properly (from the algorithmic point of view), they are quite efficient.
A readable piece od Mathematica code for a European call would be

BinomialEuropeanCall[S_, K_, r_, sigma_, T_, n_] :=
Module[{dt, a, up, down, P, Q, BinomTree, value, level},
dt = T/n;
a = Exp[r*dt];
up = Exp[sigma*Sqrt[dt]]*a; down = Exp[-sigma*Sqrt[dt]]*a;
P = (a - down)/(up - down); Q = 1 - P;
P = P*Exp[-r*dt]; Q = Q*Exp[-r*dt];

BinomTree = Table[Max[S*down^node*up^(n - node) - K, 0], {node, 0, n}];
Do[BinomTree =
Table[{P, Q}.{BinomTree[[node]], BinomTree[[node + 1]]},
{node, 1, level}]; {level, n, 1, -1}];
value = BinomTree[[1]];
Clear[BinomTree];
value]

Nevertheless, there must be some disadvantages of binomial trees, otherwise my blog colleague Michael Aichinger would not have any reason to tell you about, say, Finite Elements and other really clever methods.
Even or odd?
One disadvantage of naïve implementations of binomial trees is that the option value depends quite heavily (and oscillatory) on the number of levels used as the following figure exhibits:

For vanilla instruments, these oscillations could be repaired by calculating the mean of two neighbouring values. But when discontinuous conditions are of importance (like in knock-out options), things get even worse. The following figure shows the value of an up-and out call option calculated by binomial trees and its binomial delta.

The true (Black-Scholes) delta should become negative above 115 or so. But the calculated binomial delta is positive in most of the points and negative only at the sharp peaks downwards. So, if one delta-hedges, he/she might end up with a situation of increased instead of decreased market risk. Well done, trees!

I will return to trinomial trees in my next blog entry.

We take UnRisk-Q to the Quant Community

Our PRICING ENGINE has been introduced 2001. Hundreds of front-office and risk practitioners enjoy immediate results, from instant deal types in the Excel front-end and the robustness from high-end numerical schemes.

it most probably was a Fiat 500 Abarth. The name comes from the world famous tuning firm that in the 1950s and 1960s took ordinary Fiats and turned them into racing cars with a formidable reputation.

It has exceptional performance, 135 bhp but safety ist maximized by the latest control technologies. It is driven by the need to improve a car's performance for comfort and security.

We, at UnRisk, have tuned proven models by high-end numerical schemes and boost performance by clever principal component application, GPU co-processing and Grid-computing. To get a speed-up of 10.000, you do not need a supercomputer. A minimalist Windows-based infrastructure is perfect. A solution, easy to set up and deploy, that is validated. UnRisk FACTORY.

Equal Valuation and Risk Management?

Valuation and risk management, two sides of the quant business, must be treated with equal sophistication, with equal respect, and with equal suspicion. And there must be closer interaction between them. At every stage of valuation and model development you must be asking questions about risk and robustness. It is dangerous to come up with some fancy model and only afterwards start asking questions about model error. Anyone who has ever calibrated a model knows that the methods used to mitigate model risk almost come as an afterthought, and are totally inconsistent with the original model.

17-Jun-08, Vienna. Over 30 quants and risk experts joined Andreas Binder and Michael Aichinger on their tour through the most beautiful, but dangerous fields of mathematical finance. In the spirited discussion it turned out again that it is recognized that different models applied on the same deal type will usually lead to different prices (If they really differ, distrust the instrument)). Not so surprisingly, the surprise that good, but complex, model information can get lost in the numerical jungle and evaporate to ground-fog.

Next Model Risk event: 15-Jul-09, Zurich.

The UnRisk Language: Callable Bonds

UnRisk code: click to enlarge

Let's assume we want to price the following callable fixed rate bond:

- the underlying bond pays annual coupons of 5.2%, following the 30/360 day-count convention and corresponding to a nominal amount of 100,000 EUR

- the first coupon period starts at October 10, 2008 and the redemption (the nominal amount) is paid at October 10, 2018

- in addition, the bond is callable at each coupon date, starting from October 10, 2011

What are the steps to translate the termsheet of this callable fixed rate bond into the language of UnRisk?

The picture above gives the answer (due to the descriptive language of UnRisk, the code does not need to be explained in detail): First, the underlying fixed rate bond is constructed - this is done by the constructor MakeFixedRateBond. In the next line it is shown how the cashflows of the underlying bond may be generated (the function Cashflows is applied). In order to make the bond callable, a call schedule (constructed by MakeCallPutSchedule) has to be assigned - the callable bond is then constructed by the use of the function MakeCPFixedRateBond. That's about it.

The next question is: How do I get a fair price for this callable bond under, e.g. , a Hull & White (or a Black Karasinski or a LIBOR market) model?

Again, the picture above shows how this can be done: First, the Hull & White model has to constructed - we use the command MakeGeneralHullWhiteModel (usually this has to be done by the use of the UnRisk calibration routine, which identifies the parameters of the interest rate model from given bond, cap and swaption prices). The available interest rate models (especially their calibration) will be explained in a later blog.

But let's come back to our callable bond: By the use of the function Valuate (which may be used to price any financial instrument under any model) we gain the fair value of the callable bond under the given Hull & White model (the credit spread is assumed to be 80bp). The returned list contains the dirty / clean value of the underlying bond, the value of the call option and the dirty / clean value of the callable bond.

Symbols or Numbers?

I start this Blog label "Mathematics" with a reference to Paul Wilmott's Blog Numbers People and Symbols People. Paul named as one of the most influencing quantitative analysts, in his blog he discusses the ability of people to handle abstractions.

It most probably was a Wallpaper . They present a tightly edited discreetly packaged list of the best a location has to offer the design conscious traveler. Wallpaper CG are compiled by the magazine's travel experts providing up-to-the-minute information.

Each guide combines info on Landmarks, Hotels, Urban Life, Shopping, Sport, Architours and Escapes. As a business traveler, I like the 24 hours, see-the-best-of-the-city-in-just-one-day, section. WCG issues are sub compact. I put it in a pocket of my jacket and it goes where I go.

Save Wallstreet's Soul?

Newsweek published the following article recently: Revenge of the Nerd

Paul Wilmott is a 49-year-old Oxford-trained mathematician ond arguable the most influential quant of today .. Wilmott has cultivated a loyal following of truth-seeking converts from the failed school of thoughts that the entire world can be turned into Greek symbols, plugged into equations priced and predicted...…

It was most probably the Maze in London. It is one of Gordon Ramsay's restaurants. As Gordon Ramsay, the Chef of Maze, Jason Atherton offers dishes as result of a, what I would call, mathematical cuisine. He demonstrates that simple cooking methods and reasoning (instead of unconstrained combinatorics) are often the best when creating best dishes. At Maze they offer a tasting menu with small dishes for a scalable meal of your own choice. The service is perfect. They are interested in what I want to eat and drink and not what they want me to eat and drink. They never give false comfort about their offerings.

How to Do but not Overdo it

Yesterday, our first compact seminar on Model&Methods Risk in Quantitative Finance. In our home town Linz. We invited core users from who we could expect unmistakable responses and assessments.

Andreas Binder (picture) and Michael Aichínger guided through the most beautiful but also dangerous fields of mathematical finance and pointed out where one can still make fundamental errors in concrete derivatives analytics examples.

Blame me? Blame you? Blame Math?

This morning in my email inbox: Amazon recommends Lecturing Birds Flying. Can Mathematical Theories Destroy the Financial Market?, Pablo Triana. I haven't read the book but it refers to N. Taleb's Fooled by Randomness and Black Swan, which I read. Book description: Leading and contrarian thinkers have been talking for years about the conflicts between theoretical and real finance. Nassim Taleb first addressed the issue in his technical treatise on options, Dynamic Hedging. Now, in Lecturing Birds on Flying, Pablo Triana moves the conversation to a narrative that anyone can follow.

In FbR Taleb seconds Unmberto Eco's insight: It is not important what we know, it is much more important what we DON'T know?

It was most probably a GENEVA Lab Sound System made by a team that is passionate about design and engineering and "never will compromise on desig or technology".

The GenevaSound XL is a powerful complete stereo system, with built-in stereo tweeters, woofers and subwoofers, powered by a 600 Watt high fidelity digital amplifier. It delivers a sound performance normally expected from a very large and expensive stereo system.

If UnRisk was a Chair

It most probably was a "Fjord" from Moroso designed by Patricia Urquiola it is a multi-purpose armchair which fits perfectly into various interiors from the most modern to classic.

"Its soft supporting and comfortable form adapt to the body, fitting around it, following its contours and anticipating ist movement. The light frame takes shape thanks to the use of new material and production techniques. It is object of effective daily use and can be used in any public area"

If UnRisk was a Wine

It most probably was a Riesling, Erste Lage "Uhlen R - Roth Lay" from Heymann Loewenstein, Winningen, Mosel(-Saar-Ruwer).

I would rate the 2007 97/100 (Tanzer rated the 2005, 95+).

"This awesome Cuvee, the pinnacle of Loewenstein's dry wines is rich, opulent and fruity with notes of chocolate and coffee and spice, it is complex and multi-layered. And outstanding persistent"

The very steep riverbank vineyards overlook the Mosel river benefiting from a cool climate.

HL's winemaking is, after years of following rules and experimenting, an attempt to produce great art.

And it costs a tenth of a similarly rated Montrachet, or Hermitage blanc.

David and Goliath

In a market of Goliaths able to justify large spend on risk management how are the numerous small market participants, like capital management firms to meet regulatory pressure whilst staying cost effective. Their functional requirements are as demanding as those of a large bank. The difference, their business is more focused in terms of strategy, client segments and product volumes. Consequently, their number of different positions and cash flows is lower. That said, they need a feature-rich system for the small.

Fair price of a fair-price valuation system?

The UnRisk PRICING ENGINE, the ultra-fast pricing and calibration engine, addresses kind of financial products management, in any position of the sell-to-buy chain. Users have their term sheets replicated, apply the instantiated models, price the instruments and do what-if analysis.

Co-evolution of customer needs and technology development

UnRisk PRICING ENGINE incorporates advanced numerical schemes (C++) integrated into a declarative programming layer (Mathematica). On this level it is an instrument builder and pricing engine in one, providing insight in the mathematical schemes and deal type constructors.

Recently, Wilmott Magazin interviewed a few members of the quantitative finance community: "Should working ín finance equate with the responsibilities of public service?". My answer (compiled): No. Avoid any innovation-killer and think-stopper. Strong regulation of the core business leads to outsourcing of responsibility. But inter-business risk management and its related infrastructure, responsibility and funding shall become globalized.

Sixty years ago, digital computers made information readable and models computational. Twenty years ago, the internet made information reachable. Ten years ago, Google built massive computational corpuses to search massive information. Can it still our hunger for enormous computer performance? Valuating 1000 instruments across 1000 scenarios, 10 sec per valuation, took 10 million seconds, 120 days. If you needed the result in a minute a speed up of 150.000 was required. You might get reasonable speed up by coarse grain parallelization on up to 1000 core processes. A speed-up of 150 is still required.

Model&Method Risk

As part of our know-how package offer, we have set up a new compact seminar on Model&Methods risk. On demand (we go, where you want us to go). 2 hours. Free.

For whom? Quants and risk professionals.

More is not always more

Since the beginning of the financial crisis markets have shifted to new regimes, characterized by almost unimaginable anomalies. It has exposed failures in risk management, but also familiar models and valuation techniques became unmasked as unreliable.

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