UnRisk Insight: 2011

Agenda 2012 - The All-New UnRisk

We achieved our objectives described in the Agenda 2011.
We made the box blazingly fast and even whiter. And we continuously unleashed our innovations empowering quant developers to use the same programming power, we use to swiftly develop solutions, like the UnRisk FACTORY and FACTORY Capital Manager.

2011 - Unleashing The Programming Power Behind UnRisk

2011 was the year of UnRisk-Q - the culmination of the co-evolutionary development of our bank-proof UnRisk Engines and the UnRisk FACTORY, offered to quant developers.

Aaron Brown - Red-Blooded Risk

I am not a book reviewer. But there are article writers who I follow. One of them Aaron Brown, who is a frequent writer in the Wilmott magazine. He is an original outside-the-box thinker and it is insightful and entertaining how he touches risk in a general sense and in financial practice. I wrote about his pointed view on VaR in VaR of the jungle.

Are We a Good Company? Is This a Luxury?

Inspired by the HBR November 2011 issue's cover story What Great Companies Do Differently I thought, are we good? What is the meaning of "good"?

I remember, in traditional theories the notion dominated: good companies transform something into big margins. In our case it would be knowledge? Are we a machine that generates money from knowledge?

On Time Travel

Time travels raise a lot of questions (like the grandfather paradox) - political regimes banned time-travels-in-culture, because they were "irreverent" - science says it can only go forward.

We Did it Right by Doing it Wrong?

Technical and economic feasibility do not always go as a couple. Since we launched UnRisk, we made decisions that might have seemed questionable at the time they were made. Design principles, algorithmic innovation, transparency and openness ... do not always pay back immediately.

UnRisk goes Cross Platform

UnRisk-Q – Removing the irrational fear of new architectures

2001, when UnRisk started, quant finance practitioners in banks utilized almost exclusively Wintel platforms. Consequently, UnRisk was optimized for Wintel.

Turning On The Innovation Spiral

Last week we conducted another development workshop with Solventis.

Solventis uses the UnRisk FACTORY as a valuation and risk engine producing massive information from portfolio across scenario and VaR calculations automatically.
That information is then transformed by distinguished analysis and test routines into special insight.
All together offered as SaaS/web platform to their customers for better decision support.
I wrote about the development partnership in A Barcelona Cloud That Rains Insight.

IDRC is a professional services and consulting expert in Data Analysis and Quantitative Modeling and Research, based in Frankfurt, London, Moscow and Mumbai. Their consulting is packed as two broad formats: ProcessAnalytics and Quant Research Center.

EMH Is An Illuminating Idea - But Not Reality

Recently, John Kay received attention on his essay The Map Is Not The Territory.
He spells out methodological critiques of economic theory in general and rational expectations in particular (interestingly enough 2011 Nobel prize winners Sargent and Sims - received the price for their research having centered around the rational expectation framework).
In the core of Kay's critique: the EMH is an illumination idea, but it is not "reality"

Model Validation - New or Used?

Validate models qualitatively and quantitatively that are used by the front-office.
Is it enough to assess, whether a model or methodology is fit for its purpose?
No. What is the subdomain where it is? Can it be easily extended to become more adequate covering a broader variety of deal types (extrapolation is dangerous)?

Did Our Training Change In Response To The Crisis?

Yes it did. In 2009 we launched the UnRisk Academy that extended our product use training with courses providing full explanation on quantitative theories, mathematical approaches and critical implementations.

UnRisk FACTORY 3 Is Released

21-Sep-11, UnRisk took UnRisk FACTORY 3 and UnRisk FACTORY Capital Manager 3 to financial institutions.

The Age of Hyperspecialization?

After the Think It. Build It post, the article in HBR, Aug-11 came in my mind: The Age of Hyperspecialization, the authors say that modern technological advances will transform the workplace by dividing work into smaller tasks performed by ever more specialized workers. And, they summarize, this will create quality, speed, and cost advantages for employers.

Think It. Build It.

I often ask myself, do quants need to know all traps and dirty tricks solving multi-factor PDEs numerically or with asymptotic math approaches, solving inverse problems, like model calibration, exploiting, say, CUDA over the grid optimally?

Distinguishing Between Complicated and Complex Matters

My skeleton is complicated, I am complex. A convertible with reset, call / put features and soft calls is complicated, how to trade it is complex.

UnRisk FACTORY or UnRisk FACTORY?

Having built radical innovation from bottom up, we are able to swiftly enter into new directions and service longtime partners and friends with special attention.

Integrating our blazingly fast valuation and risk engines into transaction processing and web service environments to a portfolio across scenario simulation factory, we have created the UnRisk FACTORY. It is used in banks, private banks, capital management firms, insurance and financial services institutions.

I recently found this: Phil Maymin at TEDxNSIT

Markets are efficient (current prices fully reflect all information available in past prices) if and only if every decision problem thats solution can be efficiently verified (NP) by a computer, can also be efficiently solved by a computer (P). In polynomial time.

In general the P versus NP complexity problem in computer science is unsolved.

Shhh, .... UnRisk FACTORY 3 is Coming

In about a month, we will take UnRisk FACTORY version 3 to financial institutions.

UnRisk or UnRisk?

Serving practitioners from front offices to product and risk controlling in 10 years, we have developed a sophisticated set of engines and tools and tied them together to a valuation and data management factory the UnRisk FACTORY. It offers one key benefit to its customers: automation of portfolio across scenario analysis - by pushing buttons or running scheduled tasks.

From Financial Daredevils To Autopilots?

Thinking about surfing the turbulent price waves an aspect of discontinuity in technology development enters into my consciousness.

This weekend, again at the lake - the Attersee: Yesterday evening, within twenty minutes the wind changed from doldrums to storm and the water began to swirl.

We Live in an Era of Uncertainty and Risk

In the shadow of the boat house I re-read a book, I have not looked into for a while: M. Mitchell Waldrop's Complexity and its first chapter linked me to Brian Arthur's work especially his understanding of economic behavior, in the opposite of the classical theory of economy (and this in the 1970ies!): Increasing Returns and Path Dependence in the Economy, also title of his book released 1994, a collection of papers.

This year I have rented a little apartment in an old post station at one of Austria's most beautiful lakes - the Attersee.
Next week I will take a few days off and enjoy this view when coming through the veteran wooden boathouse to capture the first sun beams of the morning. Looking back a little - Gustav Mahler stayed in this corners composing …

2^5 Financial Institutions in Austria Selected UnRisk

With the order of an UnRisk FACTORY and VaR Universe by a capital management firm UnRisk customers grew to 32 in Austria alone this week.

Harnessing The Power of Feedback Loops

Article in WIRED, July 2011. Our brains and our behavior are driven by feedback loops.
In factory automation, feedback loops are used to control machines tools, robots, transportation and handling systems, assembly, ... to go-to mechanisms need to know where-they are. Machine behavior is the result of constant instantiation, calibration and recalibration of models, say geometric, kinematic, dynamic, elasto-plastic, thermal, ... in feedback loops.

About our achievements and the benefits of concrete partnership with a leading maker of hybrid CPU-GPU systems - a white paper on HPC in Computational Finance by Utilizing NVIDIA GPUs.

Dangerous biases can creep into decisions even in fields that are assessed as strictly technical. Questions that decision makers in investment and risk management should ask themselves beyond the usual risk - managing model & method risk. Measuring model uncertainties special teams will have delved more deeply into the analysis than the decision maker has time to. Questions, like the following might help

Smaller, Faster and Much Cheaper - Cluster Level Performance Right At Your Desk

I just returned from the London and Paris events. Wolfram, NVIDIA, Supermicro and us presented in-time results that were impossible before.

On Sunday, I will move to London, where we co-organize the first-in-a-tour Wolfram-NVIDIA-UnRisk event focussing on the acceleration of quant finance tasks.

UnRisk 5 Rolls Out for Blazing Business

30-May-11 - we have released UnRisk PRICING ENGINE and UnRisk-Q version 5, introduces as UnRisk 5. This release is free for all UnRisk Premium Service Customers and will be shipped to all new customers immediately. UnRisk has been introduced 2001. Now UnRisk 5 is the 18th release.

May 17, 1970 - The Boat Was Seaworthy

From Wired This Day In Tech: May 17, 1970 Thor Heyerdahl sets sail aboard Ra II to cross the Atlantic Ocean in a boat built of reeds and succeed where the previous expedition (aboard Ra I) failed.
(Heyerdal gained worldwide fame when he crossed the Pacific Ocean on Kon-Tiki - a boat constructed of woods).
One purpose of the Ra II voyage was to demonstrate the seaworthiness of buoyant reeds.

Intra-Cloud Valuation Management

In the last weeks, I enjoyed exciting discussions with technology innovators from Wolfram, NVIDIA and Xenomorph. This motivated me to I repeated part of the me talking to myself in the future play. About cloud computing in quantitative finance.

Xenomorph and UnRisk - Valuation Acceleration And Management

For swifter time-to-insight the management of valuations of instruments in a multi-asset, multi-model, multi-datasource and multi-timeframe environment one needs systems that work in different climates.

Blazing Business - New Computing Muscles Changing Everything?

If you look into it with a bottom up view, today many instruments have intelligence inside and that is a big change.
In physics, new tools that are made available by computer power drive new ways of studying and interpreting behavior. Instead of individual specifics and dependencies, formulated in complex models, researchers begin to work with immense collections of data. And yes, if you have a system that let you, say, zoom in from a forest to the inside of a single cell of a chanterelle you will get new insight. Maybe, how the mycelium connects plants.
Katy Boerner calls such a system a macroscope a system that provides a vision of the whole.
Provocatively asking, does this only change the way of doing visual data analysis? No it is more general about visualizing the dynamic of knowledge. But what about the knowledge engines. Do they support the same platforms and tools?

Last Thursday and Friday we conducted a workshop with one of our customers on controlling risk from the valuation of single instruments to large portfolio level in time. Viewing the computational side of the financial processes uncertainty can evolve from the environment, the initial conditions and the intrinsic generators. Let me short call them technology risk that can be poor adequacy, accuracy, robustness but also timing.
If you have clever algorithms and powerful computing muscles you can do intrinsic method and model testing, automated precision control, data plausibility analysis, ....
Wanting to analyze portfolios across scenarios (VaR calculations, back testing, stress testing, ..) in time calls blazingly fast calculations with single valuation time in microseconds.
We at UnRisk are in such a Blazing Business.

The new hybrid CPU - GPU systems empower us to intelligently combine coarse grain and massive parallelism that multiply to speed-ups in the hundred thousands - providing our customers with a macroscope to monitor the dynamic of their blazing business.
For one aspect meet us at Accelerating Risk Analytics.

Free Seminars - UnRisk + Mathematica + NVIDIA Accelerating Risk Analytics

Wolfram, NVIDIA and us will present New Technologies For Accelerating Quantitative Analytics in London, Paris, Zurich, Frankfurt.

We want to point out that there are reasons to introduce advanced computational systems to master the growing complexity of the modern quantitative finance. We will present new ways for valuing sophisticated deal types and manage risk in time.

And we want to point out that each single task in quantitative finance bears the danger of fundamental mistakes and timing problems, why those can become horrible in interplay and how to avoid them.

The events will cover:

NVIDIA CUDA, Mathematica, UnRisk, technologies, coverage, products, solutions, software engineering aspects - why they fit so well together
Optimal use of the technologies - how to eliminate the usual trade off of elegance, accuracy, speed and robustness
Analyzing massive data – a suite of statistical and computational functions to avoid misinterpretation of data set
Model types, parameter identification, numerical methods – can model risk be quantified? The fit is good, why is the price so bad?
Pricing and risk analytics of complex options – Why it has intrinsic fragility, when advanced volatility models are used and how to avoid it
Implementation – The latest advantages of implementations on NVIDIA Tesla computers in the UnRisk / Mathematica framework

Event benefits

Exclusive insight – full explanations of the technologies, advantages, limits, traps and improvements
Practical example – live

Who should attend?

Quants, front office practitioners, risk professionals, researchers, who need to accelerate their time-to-insight and new perspectives in massive data and quantitative analytics.

Shhh, .... UnRisk 5 is Coming

In about a month, we will take UnRisk-Q and UnRisk PRICING ENGINE version 5 to financial institutions.

It Is An Outstanding Product - Is The Pricing Right?

In the technical set-up, we have done our best efforts to select the best models, best solvers and best implementations.

Will There Be A Do It Yourself Revolution in Finance?

I have been working in factory automation for many years. We had quite original ideas, but the hidden forces that shaped our decisions were technologies and related cost. In the late 1970ies we had already CAD/CAM support and in the mid 1980ies multi-manufacturing and multi-axes CNC machines could produce quite complex finished parts in one set-up. We had robots and automated vehicles, .... All in large scale.

UnRisk VaR Universe Rolls Out

8-Apr-11, UnRisk took its comprehensive VaR module on top of UnRisk-Q to quant developers in financial institutions.

VaR Seminar in Vienna

28-Apr-11, the compact-seminar UnRisk VaR - The UnRisk Option in Risk Management will take place in Vienna.

A Stock Market Panic is an Avalanche

Econophysics, obtain economics insights from the physical world. Through this eyes a stock market panic is an avalanche. Remember, starling flocks are flying avalanches.

Don't Get Blinded By The Numbers?

Just an hour after the release of previous post,
I read this column from Roger L. Martin in HBR, Mar-11
Although factors such as design and trust can be reduced to numbers, they can be interpreted and understood, Martin summarizes.

I agree (if you have them in the right time and shape).

Learn From The Future

I am over 60 and I am still a student.
Meeting people with bright ideas and deep knowledge at a conference always triggers a phase of informing, investigating, exploring and constructing knowledge (sometimes brooding).

We just returned from the Frankfurt MathFinance Conference where we contributed with our concepts, methods and tools utilizing the NVIDIA Tesla architectures.

Can't Say "No"?

I frequently read, what Dan Ariely publishes and posts on behavioral economics. Today: my problem with "Just say No".

Multi-Strategy and Multi-Method

Some time ago, I read Aaron Brown's article in Wilmott magazine Jan-11, The Education of a Quant. Locked into a single risk model? Better no model at all.

The Basis of the Universe Isn't Matter or Energy - It's Data

Interview in WIRED Mar-11, with the author of the book The Information, James Gleick. Information flows everywhere, through wires and genes, through brain cells and quark. But the conclusion in short is, the universe we know is only information.

Shhh, the New VaR Universe is Coming

In a month, we will take our new VaR module, on top of UnRisk-Q 4.1, to quant developers in financial institutions.
As outlined in VaR of the Jungle it will calculate cubes of VaR that are possible inputs for an advanced risk management process.

What Do We Sell?

We know the Eager Sellers and Stony Buyers trap well. Innovations fail because customers irrationally overvalue the old and makers irrationally overvalue the new.
This is another challenge for me as marketer.

Scream From the Mountaintops What You Have Bought?

Recently, I have read that the new generation want to scream from the mountaintops what they have bought, and to the largest audience. I am afraid, this is not true for our business, and I think, this is not even true for the If-UnRisk-was-a ... products?

Audrey II - Attraction and Risk

In the musical film The Little Shop Of Horrors Seymour, working in a flower shop, finds a very mysterious undefined plant (from another planet?), which he calls Audrey II. And this is where the fun and the trouble begins. Audrey II makes the flower shop a flourishing hot spot and Seymour something of a celebrity.

Cheat With Science: How To Suss Out a Lie

Just by chance, I read this article after I have written the previous post on "Cheating a Bit .. ".
WIRED Feb-11 Cheat With Science. So, the cheaters need to be able to lie and know about the theory that a person's brain works harder when they are dissembling .... and that this extra cognitive load has physical manifestations: one of them let them wear shades.
In addition, do not give indirect incentives and collect shades at the porter's desk.

Nearly Everybody Cheats A Little Bit,

when incentives point them in that direction - Dan Ariely in WIRED UK.
What we can learn from the experiments conducted by the professor of psychology and behavioral economy at Duke university: people are caught between the desires to make money and to remain honest in their profession and work. Direct payments seem to erect a higher barrier for cheating than indirect .... (double "correct" answers in the experiment).
How to minimize such conflicts in financial markets?

Planning for the Unexpected?

Yesterday, I got access to a quite new Blog, stirrisk, dedicated to contribute to risk management by original ideas and thinking . The post Business Planning for Turbulent Times refers to the book of that title and a special chapter that I read.

Riding The Price Waves

"Invert, always invert" (to solve the problem) Jacobi said. If we take the price dynamic as the absolute, as the Blank Swan thesis suggests, everything else is inverting.

UnRisk-Q. Striving for the best performance we have achieved another quite remarkable result: the calibration of a Heston model, that requires approx. 1 Million single valuations (related to market data) took only 8 seconds - on an 8 core PC equipped with one Tesla 2050 GPU from NVIDIA - its improved double precision support is indispensable for this task.

VaR of the Jungle - Don't let the Leopards and Mambas Inside

VaR is a widely used risk measure of the risk of loss on a specific portfolio of financial assets. VaR expressing risk as a single number has been criticized since it moved from trading desk into the public eye. Summarizing it gives false confidence, because it cannot express risk of rare events.
Even VaR supporters agree that it is easy to misunderstand, and dangerous when misunderstood.
Making VaR control the central concern of risk management it is more important to worry about what happens, when losses exceed VaR.

Bulls, Bears and Bots

WIRED, Jan-11, Algorithms Take Control Of Wall Street. Today Wall street is ruled by thousands of little algorithms, and they've created a new market - volatile, unpredictable, and impossible for humans to comprehend. It's the machine market now, we juts trade in.

With 1-2-3 Spreadsheets Became Killer Applications

Wired Blog: This-Day-In-Tech. 26-Jan-1983: Spreadsheet as Easy as 1-2-3.
1983: Lotus begins selling its spreadsheet application for Microsoft DOS, called 1-2-3.
1-2-3 was not the first spreadsheet application — it was preceded by VisiCalc. But 1-2-3 quickly became the most popular, helping to boost sales of IBM PCs and PC clones.

Utilizing The New Computing Muscles

It seems that the race for speed in finance is driven by sprinting for advantage in providing more frequent trading. Huge computing centers are built to trade in less-than-a-blink-of-an-eye. High-frequency traders use algorithms to zip in and out of markets often changing orders (and even strategies?) within seconds. So far so ….

On The Valuation Planet - Quants And Us

It is said insular, opaque markets are passe. Infrastructures for for independent asset and portfolio valuation, especially where complex and structured products are concerned must be re-invented. As valuations need to become more individual, valuation and analytics platforms need to become transparent.

The Future Is Our Friend

Mathematica 8's Software Development Support allow us to even improve and accelerate our Mathematica/C++ integration and workflow.
NVIDIA's Tesla GPUs and CUDA for programming massive parallel processors allow us to calibrate complex models and offer solutions hat could not be done without.

said Marshall McLuhan. McLuhan's most widely known work Understanding Media: The Extensions of Man is a pioneering study in media theory. McLuhan's insight was that a medium affects the society in which it plays a role not by the content delivered over the medium, but by the characteristics of the medium itself.

UnRisk Premium Service - What Is It?

If you purchase a product, you want to get the most out of it and have the flexibility to adapting it to your platform- and use-evolution.

The UnRisk Agenda 2011

The financial crisis has raised many questions. In the frame of principle discussions, like do market imperfections arise out of imperfect or asymmetric information, or alike, many of them have a deeply technical nature: Is quant finance about predictive modeling, or is it explanation by inverting real market dynamics? Shall we model more or less, use simpler or even more complex models? Is VaR misleading? Can we assess the quality of a model, without looking into its implementation? How does the coverage and quality of market data influence the quality of deal decisions? How will new ultra-fast processors and their mobile-focused versions influence quant finance?

Is There Anything That Only I Can Do?

I have started as a programmer 35 years ago and have been a CEO for 20 years now.
I am passionate about future technologies and demand-first innovation. With UnRisk we are celebrating its 10th year. It's been a remarkable journey so far and we are proud of the work we have completed through the years. UnRisk - 10 Years After.

Like every year, I took a few days off and went to Ramsau-Dachstein to enjoy some cross country skiing. Skating on their world championship cross-country trails is really challenging.

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