Cross Country Skiing and Quant Finance

I returned from the Antholz Valley yesterday. It was a fantastic week. The map above show the tracks of the Antholz Biathlon Centre. At the world cup event tracks 5 or 6 are used by the top female and male biathletes.

I used track 6 and 7 and skated 7 days, up to 2 hours per day.

Find the optimal risk

In seeking the optimal risk I selected duration and speed to have fun but avoid hazardous actions. The Antholz tracks are not the most difficult ones, but their profile look like a smoothed trajectory of a, say, stock price time series. Ups and downs follow quite frequently - arhythmic.

So you need to decide: how fast do you go down to get enough momentum saving energy when skating up the following uphill section without falling. And how fast do you skate uphill to reserve enough power to make the final step powerful enough to get the right speed for the following downhill part.

I never fell, but in a few cases I became breathless at such little hill tops. Running the same tracks more often you become more experienced and find the optimum easier.

(BTW, as a human you usually act like a fuzzy controller, not reacting fidgety to each little change.)

In finance you do not find the same profiles again and again. But to get experience you have simulation.

The speculative swap

Andreas continued the swap story. Remember, this is an example of a financial deal that accumulates all possible misunderstandings between a seller (the Bank) and an investor (the City). No surprise, the deal is disputed at the court. But there was no need to land it there?! The swap is speculative, but the risk analytics is not difficult.

See the episode The Swap