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.
PureProd?
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".
PureIndMath
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.
PureQuant?
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...
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 problemsTheir purpose is
radical innovation in healthand 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 expertsIn 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…
PureProd?
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".
PureIndMath
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.
PureQuant?
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.
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.
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 ;)
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
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
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.
Therefore
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.
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
- I like to explore new places
- I like to travel
- 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 started 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.
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?
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 started 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...
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.
UnSelling UnRisk?
First There Was UnMarketing Now There Is UnSelling - this post of "Six Pixels of Separation" pointed me to this book about everything but to sell.
UnSelling is about the bigger picture of sales.
Analogical, UnRisk is about the bigger picture of risk.
In both cases you need a lot of experience and in depth knowledge to get the bigger picture.
But yes, it is sometimes indispensable to unlearn. The rules of selling - as well as the rules of risk management - have fundamentally changed.
The programmability of sales by understanding value, access and education and the programmability of risk by understanding money, duality, boundaries and optimization…come to my mind.
UnSelling is about the bigger picture of sales.
Analogical, UnRisk is about the bigger picture of risk.
In both cases you need a lot of experience and in depth knowledge to get the bigger picture.
But yes, it is sometimes indispensable to unlearn. The rules of selling - as well as the rules of risk management - have fundamentally changed.
The programmability of sales by understanding value, access and education and the programmability of risk by understanding money, duality, boundaries and optimization…come to my mind.
A Surprising Entrepreneurship Paradox
With affordable technologies and tools, better communication channels, skill sharing…it has never been easier to start your own company, but entrepreneurship is in the decline.
I'd not have believed that the decline happens for years, before I read about the Entrepreneurship Paradox at Pieria.
Concluding, it seams that the future is becoming old, like the rest of us (entrepreneurs)? Why is this so? Do the (business) failure rates of younger firms increase? Does it need (too much) time to become antifragile? Do entrepreneurs hate to manage?
OK, entrepreneurship at the high-tech sector started declining after the dot-com crash. But the dot-com boom triggered a broadband emergence that helps entrepreneurship?
What to do? IMO, for a vibrant, growing economy, older firms should co-operate much more with the younger and fight the worst enemy: be happy with the achieved, together.
Reading this, has inspired me to write about the development of a quant entrepreneurship (dependent or independent). I will post it on Tuesday.
I'd not have believed that the decline happens for years, before I read about the Entrepreneurship Paradox at Pieria.
Concluding, it seams that the future is becoming old, like the rest of us (entrepreneurs)? Why is this so? Do the (business) failure rates of younger firms increase? Does it need (too much) time to become antifragile? Do entrepreneurs hate to manage?
OK, entrepreneurship at the high-tech sector started declining after the dot-com crash. But the dot-com boom triggered a broadband emergence that helps entrepreneurship?
What to do? IMO, for a vibrant, growing economy, older firms should co-operate much more with the younger and fight the worst enemy: be happy with the achieved, together.
Reading this, has inspired me to write about the development of a quant entrepreneurship (dependent or independent). I will post it on Tuesday.
A Must Read for People Working on Counterparty Risk
Today's blog post will be a short review of the book
Counterparty credit risk and credit value adjustment: A continuing challenge for global financial markets – Second Edition by Jon Gregory
I have been working on the xVA topic now for almost two years and this book guided me for most of this time. The author Jon Gregory is the acknowledged global expert on counterparty credit risk.
The book starts with explaining the emergence of counterparty risk and how financial institutions are developing capabilities for valuing it. Aspects of portfolio management and hedging of credit value adjustment, debit value adjustment, and wrong-way counterparty risks are also covered. In addition, the book addresses the design and benefits of central clearing, a recent development in attempts to control the rapid growth of counterparty risk. The book offers many practical examples, including experiences from the recent credit crisis.
Without using too much complicated Mathematics Gregory is able to explain also complex interrelations. I can really recommend this book to everybody interested in the topic.
Counterparty credit risk and credit value adjustment: A continuing challenge for global financial markets – Second Edition by Jon Gregory
I have been working on the xVA topic now for almost two years and this book guided me for most of this time. The author Jon Gregory is the acknowledged global expert on counterparty credit risk.
The book starts with explaining the emergence of counterparty risk and how financial institutions are developing capabilities for valuing it. Aspects of portfolio management and hedging of credit value adjustment, debit value adjustment, and wrong-way counterparty risks are also covered. In addition, the book addresses the design and benefits of central clearing, a recent development in attempts to control the rapid growth of counterparty risk. The book offers many practical examples, including experiences from the recent credit crisis.
Without using too much complicated Mathematics Gregory is able to explain also complex interrelations. I can really recommend this book to everybody interested in the topic.
This Ideas Must Die
Whenever I'm in London I spare time to visit the Serpentine Galleries. Their program inspired me to look playfully into the past from a future perspective as posted here, think about skills exchange as posted here, …
Serpentine and Edge announce a Marathon on "Extinctions" - among many exciting (and cool) contributions, it touches one thing that address muscles in my brain that I rarely use: there is no such thing as an abstract program … the principle of Constructor Theory (Physics)…Extinction of abstraction?
Edge's own contributions to the conversation will be published in Feb-15. This Ideas Must Die - Scientific Theories That Are Blocking Progress.
I cannot go, but it will be live-streamed here and I'll read the book.
Serpentine and Edge announce a Marathon on "Extinctions" - among many exciting (and cool) contributions, it touches one thing that address muscles in my brain that I rarely use: there is no such thing as an abstract program … the principle of Constructor Theory (Physics)…Extinction of abstraction?
Edge's own contributions to the conversation will be published in Feb-15. This Ideas Must Die - Scientific Theories That Are Blocking Progress.
I cannot go, but it will be live-streamed here and I'll read the book.
A Prime Discussion
Last week, I met a former colleague, who is now working in risk management of an Austrian bank. It was a very enjoyable evening with a few beers and memories of the times when we were undergraduate students.
This obviously (at least for mathematicians) led us to prime numbers.
So, today's question:
Does the harmonic series of prime numbers, i.e.,
converge?
I will sketch a proof (whether it converges or not) next week.
Although prime numbers seem to belong to pure mathematics, there are at least two important applications in finance: one is for encrpyting information by the RSA algoithm, the other one is for generating low discrepancy numbers.
This obviously (at least for mathematicians) led us to prime numbers.
So, today's question:
Does the harmonic series of prime numbers, i.e.,
converge?
I will sketch a proof (whether it converges or not) next week.
Although prime numbers seem to belong to pure mathematics, there are at least two important applications in finance: one is for encrpyting information by the RSA algoithm, the other one is for generating low discrepancy numbers.
What Is UnRisk For? - Updated
Jan-13, I posted what is UnRisk for
Is it still valid? Yes, nothing changed - in principle. Derivative and risk analytics serving the core business of various financial market participants and actors.
Individualization in centralized regimes?
But, the regulatory wave has brought a paradox into play. Central counter party is intended to reduce risk by standardization…but ironically, it forces certain market participants, like banks, to individualize their offerings in order to find new services and clients.
Remember, because of margin compression, OTC revenues will be / are reduced… However, central clearing also offers new revenue opportunities for banks, like execution and clearing revenues, collateral management services fees… (banks can help clients to fulfill obligations...)
Can you structure me this?
The new question: do you support xVA? needs fanning.
It's not only different for pricing, valuation and risk management, actors in various roles need different ways to deal with it. Sales, front office, risk management, controlling… practitioners and quants in interplay.
Simpler instruments became the new "structured products" under the new regimes. We were always good at valuing structured products and analyzing their contribution to risk in complex portfolios. We've put our best effort in doing it right again in the new regimes. Accuracy and speed really matter, if you need millions of valuations to get a "fair" price and risk spectra.
Technologies, development tools and solutions
The technologies behind are identical, but it will be even more important in the future to configure them for special actor groups and tasks. And enable quant developers to transform them into individual solutions for certain purposes swiftly.
You're lucky if you have a technology stack that supports this. You're even luckier if you have organized them orthogonally. And most lucky if you have created a financial language to programmatically manipulate the financial objects, contract features, frame conditions…implemented it in engines that are bank proof. We're lucky.
It empowers us to launch new products along a technology path in the near future. Exciting products - I'll keep you informed.
Is it still valid? Yes, nothing changed - in principle. Derivative and risk analytics serving the core business of various financial market participants and actors.
Individualization in centralized regimes?
But, the regulatory wave has brought a paradox into play. Central counter party is intended to reduce risk by standardization…but ironically, it forces certain market participants, like banks, to individualize their offerings in order to find new services and clients.
Remember, because of margin compression, OTC revenues will be / are reduced… However, central clearing also offers new revenue opportunities for banks, like execution and clearing revenues, collateral management services fees… (banks can help clients to fulfill obligations...)
Can you structure me this?
The new question: do you support xVA? needs fanning.
It's not only different for pricing, valuation and risk management, actors in various roles need different ways to deal with it. Sales, front office, risk management, controlling… practitioners and quants in interplay.
Simpler instruments became the new "structured products" under the new regimes. We were always good at valuing structured products and analyzing their contribution to risk in complex portfolios. We've put our best effort in doing it right again in the new regimes. Accuracy and speed really matter, if you need millions of valuations to get a "fair" price and risk spectra.
Technologies, development tools and solutions
The technologies behind are identical, but it will be even more important in the future to configure them for special actor groups and tasks. And enable quant developers to transform them into individual solutions for certain purposes swiftly.
You're lucky if you have a technology stack that supports this. You're even luckier if you have organized them orthogonally. And most lucky if you have created a financial language to programmatically manipulate the financial objects, contract features, frame conditions…implemented it in engines that are bank proof. We're lucky.
It empowers us to launch new products along a technology path in the near future. Exciting products - I'll keep you informed.
Really Big Data
This is for those of you who have wondered what this mysterious "Density Functional Theory" Michael keeps mentioning in his physics posts is about. Please don't be frightened by the somewhat unwieldy name, I'll try to give you a rough flavour and an "executive summary" in a fun way.
The dream behind the whole endeavour is that we would very much like to be able to solve Schrödinger's equation: It contains (almost) everything one ever might want to know about chemistry, about material science (which goes from steel industry down to nanotechnology, including semiconductor industry), molecular biology, pharmacology, and so on. The important point here is that one could simply compute all the required information in that areas, without needing any prior empirical knowledge, just from an invariable law of nature and a few constants.
Sounds to good to be true? It certainly is. Without going into details about Schrödinger's equation, what you would get as a result - if you could solve it - is the so-called "wave function" of the system. How complicated that wave function is depends on how many electrons there are in the system you are studying. Let's start with something simple: the good, old Ethane molecule (shown below), which consists of two carbon atoms, six hydrogen atoms, and a cloud of 30 electrons moving around them.
The wave function now depends on the positions of all 30 electrons in three-dimensional space: I hope you'll forgive me one formula - here's how it looks like:
The wave function itself doesn't have any real-world interpretation, but its square has: if you look at all that positions (r1, r2,...r30) at the same time, the square of the wave function tells you the probability that you will find electron number one at position number one, electron two at position number two, ... and so on (actually, it is not possible to number electrons, even in principle, so one still needs to subject the poor wave function to what is called antisymmetrization, which makes stuff even more complicated. Too complicated for this blog post ;).
The problem now is that this innocent looking wave function is quite a beast: consider, for a moment, you wanted to sample it on a grid and store it in memory. If you'd just use 20 grid points in each coordinate direction and double-precision numbers, this would amount to having to store 8 20^90 bytes!
That's obviously a large number, but let me briefly illustrate how large it is. The ultimate storage medium humanity could probably dream of is a medium where one could store one byte per atom - this would allow to store one billion Petabytes on the volume of a standard SD-card (like those you have in your digital camera). So how much volume would you need to store the wave function of Ethane? If you do the math, it turns out that you'd need about 1.6*10^39 cubic lightyears. Just in case cubic light years are not among the units you use on a daily basis: according to the NASA homepage, this is roughly one million times the size of our universe (a few universes more or less don't matter anymore at this stage ;)
DFT is based on an astonishing theorem found by Pierre Hohenberg and Walter Kohn in 1964. This theorem has to do something with the density, so let me explain that first: The density is the probability to find any electron (no matter which one) at a given position in space. It is a much simpler object than the wave function, because it is only a function in one (three-dimensional) position:
To give you a quick comparison: For the same 20 grid points used above for the wave function, it would take about 60 kilobytes to store it in memory - contrast that to the million universes above!
Now back to the theorem of Hohenberg and Kohn: The density could of course be calculated form the wave function (if we had that in first place). What Hohenberg and Kohn found out is that in principle, also the reverse is true! In principle (we don't know how to do that in practice), the wave function could be reconstructed from knowledge of the density alone.
In even plainer words: Those two things contain the same amount of information. Yes. The information contained in the million universes filled with mankind's ultimate storage medium can be compressed down to a few kilobytes.
I'll leave you with that thought for the time being - there is, of course, a slight catch, which is hidden in the phrase "in principle" above. Most of the research in DFT (and there is a lot) is about making this "in principle" happen in practice.
The key to many kingdoms
The dream behind the whole endeavour is that we would very much like to be able to solve Schrödinger's equation: It contains (almost) everything one ever might want to know about chemistry, about material science (which goes from steel industry down to nanotechnology, including semiconductor industry), molecular biology, pharmacology, and so on. The important point here is that one could simply compute all the required information in that areas, without needing any prior empirical knowledge, just from an invariable law of nature and a few constants.
Wave functions
Sounds to good to be true? It certainly is. Without going into details about Schrödinger's equation, what you would get as a result - if you could solve it - is the so-called "wave function" of the system. How complicated that wave function is depends on how many electrons there are in the system you are studying. Let's start with something simple: the good, old Ethane molecule (shown below), which consists of two carbon atoms, six hydrogen atoms, and a cloud of 30 electrons moving around them.
Big data
The problem now is that this innocent looking wave function is quite a beast: consider, for a moment, you wanted to sample it on a grid and store it in memory. If you'd just use 20 grid points in each coordinate direction and double-precision numbers, this would amount to having to store 8 20^90 bytes!
That's obviously a large number, but let me briefly illustrate how large it is. The ultimate storage medium humanity could probably dream of is a medium where one could store one byte per atom - this would allow to store one billion Petabytes on the volume of a standard SD-card (like those you have in your digital camera). So how much volume would you need to store the wave function of Ethane? If you do the math, it turns out that you'd need about 1.6*10^39 cubic lightyears. Just in case cubic light years are not among the units you use on a daily basis: according to the NASA homepage, this is roughly one million times the size of our universe (a few universes more or less don't matter anymore at this stage ;)
Insane data compression
I believe at this point it is clear that directly calculating the wave function is not going to be feasible, ever. Creative people have invented many different ways to get around the problem, and one of those ways is density functional theory, or "DFT" as its friends are calling it.DFT is based on an astonishing theorem found by Pierre Hohenberg and Walter Kohn in 1964. This theorem has to do something with the density, so let me explain that first: The density is the probability to find any electron (no matter which one) at a given position in space. It is a much simpler object than the wave function, because it is only a function in one (three-dimensional) position:
Now back to the theorem of Hohenberg and Kohn: The density could of course be calculated form the wave function (if we had that in first place). What Hohenberg and Kohn found out is that in principle, also the reverse is true! In principle (we don't know how to do that in practice), the wave function could be reconstructed from knowledge of the density alone.
In even plainer words: Those two things contain the same amount of information. Yes. The information contained in the million universes filled with mankind's ultimate storage medium can be compressed down to a few kilobytes.
I'll leave you with that thought for the time being - there is, of course, a slight catch, which is hidden in the phrase "in principle" above. Most of the research in DFT (and there is a lot) is about making this "in principle" happen in practice.
Sunday Thought - Know the Rules To Break Them
The summer returned today. We went to a restaurant close to the Danube. Sundays they offer lunch starting from 12 to 5 pm. We sat in the little garden and enjoyed a light menu and a 2012 Riesling "Kastanienbusch", Rebholz, Pfalz, DE.
They break the rules, because most Austrians like to eat from 12 to 1.30 pm on Sundays (and most of the restaurants close at 2.30 pm). We broke the rules, because we drank a German Riesling and not one of the celebrated Wachau Rieslings from its grand cru vineyards.
This is what wine-searcher says about Wachau wine.
What a Lazy Sunday Afternoon(a). The Small Faces broke the rules of pop when they released Odgens' Nuts Gone Flake a concept album mixing heavy rock with a fairy tale …
BTW, at UnRisk we break the rules by making the black box white.
They break the rules, because most Austrians like to eat from 12 to 1.30 pm on Sundays (and most of the restaurants close at 2.30 pm). We broke the rules, because we drank a German Riesling and not one of the celebrated Wachau Rieslings from its grand cru vineyards.
This is what wine-searcher says about Wachau wine.
Wachau's steep, sweeping, vineyard-lined riverbanks could easily be mistaken for those of Germany's Mosel, even if the wines could not: classic Wachau Rieslings taste richer, riper and more tropical than their counterparts from the cooler, wetter Mosel. They have much more in common with the richest Rieslings of Alsace and Pfalz.As a terroirist I disagree. Wachau Riesling at the "Smaragd" level became too "designed by breed yeast" and alcohol-rich - in general. Wines from Muthentaler, Veyder Malberg, Pichler-Krutzler, ... break the rules. I call their wines "clear mountain spring water with subtle terroir replication".
What a Lazy Sunday Afternoon(a). The Small Faces broke the rules of pop when they released Odgens' Nuts Gone Flake a concept album mixing heavy rock with a fairy tale …
BTW, at UnRisk we break the rules by making the black box white.
Is Economics Just Applied Optimism?
It's here again: another skirmish in the battle of econo, econo, econo - fought between Mark Buchanan (econophysicist) and Paul Krugman (economist).
Buchanan's rebuttal to Krugman's "acerbic rebuttal": slow steaming is still dreaming. It's about possible limits of material resources (especially energy) to economic growth.
Beyond slow steaming
There's one point that I want to add to this discussion: yes, innovations can help to save resources and non-material goods have a great potential for growth. But there is no such thing as an abstract program, video, music, course … They all need matter to run at.
Slow steaming
From my time in manufacturing I know: in part logistics it's not so important how long transportation takes, if it arrives at the scheduled time, precisely. The same with the corresponding information (production and operation plans, control programs, ...)
But, I want to have a train that takes me from Linz to Munich in an hour.....
Buchanan's rebuttal to Krugman's "acerbic rebuttal": slow steaming is still dreaming. It's about possible limits of material resources (especially energy) to economic growth.
Beyond slow steaming
There's one point that I want to add to this discussion: yes, innovations can help to save resources and non-material goods have a great potential for growth. But there is no such thing as an abstract program, video, music, course … They all need matter to run at.
Slow steaming
From my time in manufacturing I know: in part logistics it's not so important how long transportation takes, if it arrives at the scheduled time, precisely. The same with the corresponding information (production and operation plans, control programs, ...)
But, I want to have a train that takes me from Linz to Munich in an hour.....
A European Champion in Industrial Control
From 2 to 4 October, EuroSkills 2014 took place in Lille, France. This is thought as a championship for skilled workers.
Among 450 highly qualified skilled workers from 25 countries, the Austrian Oliver Anibas achieved the highest score. This brought him the title "Best of Europe".
Oliver Anibas is 20 years old and is an eduacted "Anlagenelektriker" (skilled worker in Industrial control), who was trained at voestalpine.
Congratulations!
Read more on EuroSkills 2014 here.
Among 450 highly qualified skilled workers from 25 countries, the Austrian Oliver Anibas achieved the highest score. This brought him the title "Best of Europe".
Oliver Anibas is 20 years old and is an eduacted "Anlagenelektriker" (skilled worker in Industrial control), who was trained at voestalpine.
Congratulations!
Read more on EuroSkills 2014 here.
Does The Antifactory Need a Factory?
I promise that I will not ride the "anti" wave forever.
But, after I've posted Antidisciplinary on Tuesday, I read more from Joi Ito and his MIT Media Lab. Especially about his suggestion: Don't be a futurist, be a now-ist.
The credo for bottom-up innovation: don't make great plans, just do it.
Lab and factory work
Tuesday was a sunny autumn day and after all that reading I went into a little beer garden nearby, to think a little ... I drank a "Benno", a Trappist beer brewed in the Danube valley at the Engelzell Trappist monastery. The recipe has a speciality: its brewed with honey.
To make and market it, the Trappist monks cooperate with the Brewery Hofstetten that brews craft beers for worldwide markets for years. The head of the Brewery Hofstetten convinced the monks to just do it and to buy the most modern brewing equipment.
This reminded me of how to do lab and factory work simultaneously.
Antifactories
Labs are places for finding a breakthrough, new ways to solve problems and do new things. But with Joi Ito's credo its more: do it everywhere and swiftly. So antifactory is all about non-factory work?
Then Andy Warhol,s The Factory came to my mind, a meeting place of artists and musicians - in the first view. Warhol collaborated with Lou Reed's "Velvet Underground" and Bob Dylan and Mick Jagger were frequent guests.
An antifactory called "Factory"? No, Velvet's John Cale said
Factories support antifactories
To be honest, we have not seen it immediately. We developed the UnRisk FACTORY (as an automated risk management platform) and UnRisk-Q for individual quant developments. And then we combined them.
It's amazing, how things fit together.
The combination enables the swift creation of tested "originals" and the making and deployment of "prints".
But, after I've posted Antidisciplinary on Tuesday, I read more from Joi Ito and his MIT Media Lab. Especially about his suggestion: Don't be a futurist, be a now-ist.
The credo for bottom-up innovation: don't make great plans, just do it.
Lab and factory work
Tuesday was a sunny autumn day and after all that reading I went into a little beer garden nearby, to think a little ... I drank a "Benno", a Trappist beer brewed in the Danube valley at the Engelzell Trappist monastery. The recipe has a speciality: its brewed with honey.
To make and market it, the Trappist monks cooperate with the Brewery Hofstetten that brews craft beers for worldwide markets for years. The head of the Brewery Hofstetten convinced the monks to just do it and to buy the most modern brewing equipment.
This reminded me of how to do lab and factory work simultaneously.
Antifactories
Labs are places for finding a breakthrough, new ways to solve problems and do new things. But with Joi Ito's credo its more: do it everywhere and swiftly. So antifactory is all about non-factory work?
Then Andy Warhol,s The Factory came to my mind, a meeting place of artists and musicians - in the first view. Warhol collaborated with Lou Reed's "Velvet Underground" and Bob Dylan and Mick Jagger were frequent guests.
An antifactory called "Factory"? No, Velvet's John Cale said
It wasn't called The Factory for nothing. It was where the assembly line for silk screens happened. While one person was making a silk screen, somebody else would be filming a screen test. Everyday something new.And Warhol earned money with the original and prints with alternate colors. But The Factory produced more and Warhol used major parts of the income to finance the lives of Factory friends and resources.
Factories support antifactories
To be honest, we have not seen it immediately. We developed the UnRisk FACTORY (as an automated risk management platform) and UnRisk-Q for individual quant developments. And then we combined them.
It's amazing, how things fit together.
The combination enables the swift creation of tested "originals" and the making and deployment of "prints".
Good at Math
is the title of Seth Godin's blog post yesterday. A short contribution. A view on math education through the lens of a marketer, author of 17 best selling books translated into more than 35 languages, a writer about the post-industrial revolution, the way ideas spread marketing, …..
It's because you haven't had a math teacher who cared enough to teach you math. They've probably been teaching you to memorize formulas and to be good at math tests instead.
… we need to get focused and demanding and relentless in getting good at math, at getting our kids good at math ...It's nothing I could add. Oh wait, only one thing: "getting our kids good at math and programming". Early. Kids are thinking antidisciplinary … they want answers and they are good in organizing to get them. Let them explore and construct things (computationally).
Running, running, running
On Sept. 25, the Linz city night run (organized by Allgemeine Sparkasse) took place. UnRisk was represented by Diana Hufnagl and Sascha Kratky, and I think they enjoyed their race.
By curiosity, I did some gathering of information on the 1896 olympic marathon race.
Did you know that the 1896 marathon was (with 40 km) slightly shorter than marathon races are today?
The winner Spyridon Louis (GRE) finished with a time of 2:58:50. Spyridon Belokas finshed third. However, he was later disqualified because there was a protest that Belokas had covered part of the course by carriage.
It seems that the 1896 olympics were less organized and less commercialized than olympics are today.
By curiosity, I did some gathering of information on the 1896 olympic marathon race.
Did you know that the 1896 marathon was (with 40 km) slightly shorter than marathon races are today?
The winner Spyridon Louis (GRE) finished with a time of 2:58:50. Spyridon Belokas finshed third. However, he was later disqualified because there was a protest that Belokas had covered part of the course by carriage.
It seems that the 1896 olympics were less organized and less commercialized than olympics are today.
Antidisciplinary
The Antifragile becomes stronger with added stress. The word defies easy definition and I think NN Taleb introduced it, because the non-fragility is not equal to resilience or robustness. This May I asked Does Antifragility Need Fragility?
Antidisciplinary is all about non-elephant animals
The MIT Media Lab uses "antidisciplinary" as position for doing research and learning. I enjoyed reading about it in Joi Ito's Blog: Antidisciplinary. It is another word that defies easy definition. It is not the same as interdisciplinary. IMO, it is a specialization on the non-specialization. Joi Ito says, it is all about non-elephant animals.
It's against fragmentation of disciplines in thinking, speaking, doing, … Thinking mathematically without restricting to special functions, operators, …? In combination with computer science it is maybe about knowledge based languages to program everything? Make "everything" computational.
Behavioral theories of finance or quant finance?
Behavior theories of economics haven been accepted in financial circles. But more than as the feedback of psychoanalysts - at "financial markets cocktail parties"? Quants may think they are all treated in features, like mean reverting … and behavioral economists may not think about turning them into something quantifiable?
Modeling Volatility and Valuing Derivatives under Anchoring
In the September, 2014 issue of the Wilmott magazine, Wilmott, Lewis and Duffy make a rare connection between anchoring (a big idea in behavioral theories) and practical quant finance. They introduced a complete-markets model with volatility smiles, tractability, and intuitive appeal as an anchoring or habit-formation model. A derivatives valuation model that has a memory.
Joi Ito may say: instead of impressing a small number of experts, taking the high risk of an unconventional approach.
Does antidisciplinary need disciplines?
Paul Wilmott's approach required different thinking but also heavy mathematics (numerics) not limited to the calibration challenges.
The antidisciplinary space needs disciplines and a rich technology stack, but also openness to ideas between disciplines.
Quants with future know this.
Antidisciplinary is all about non-elephant animals
The MIT Media Lab uses "antidisciplinary" as position for doing research and learning. I enjoyed reading about it in Joi Ito's Blog: Antidisciplinary. It is another word that defies easy definition. It is not the same as interdisciplinary. IMO, it is a specialization on the non-specialization. Joi Ito says, it is all about non-elephant animals.
It's against fragmentation of disciplines in thinking, speaking, doing, … Thinking mathematically without restricting to special functions, operators, …? In combination with computer science it is maybe about knowledge based languages to program everything? Make "everything" computational.
Behavioral theories of finance or quant finance?
Behavior theories of economics haven been accepted in financial circles. But more than as the feedback of psychoanalysts - at "financial markets cocktail parties"? Quants may think they are all treated in features, like mean reverting … and behavioral economists may not think about turning them into something quantifiable?
Modeling Volatility and Valuing Derivatives under Anchoring
In the September, 2014 issue of the Wilmott magazine, Wilmott, Lewis and Duffy make a rare connection between anchoring (a big idea in behavioral theories) and practical quant finance. They introduced a complete-markets model with volatility smiles, tractability, and intuitive appeal as an anchoring or habit-formation model. A derivatives valuation model that has a memory.
Joi Ito may say: instead of impressing a small number of experts, taking the high risk of an unconventional approach.
Does antidisciplinary need disciplines?
Paul Wilmott's approach required different thinking but also heavy mathematics (numerics) not limited to the calibration challenges.
The antidisciplinary space needs disciplines and a rich technology stack, but also openness to ideas between disciplines.
Quants with future know this.
Linking the UnRisk FACTORY to UnRisk-Q Chapter 2
In last week's blog Linking the UnRisk FACTORY to UnRisk-Q Chapter 1 I demonstrated how the UnRisk Web Service may be used to price a financial Instrument, which has been set up in the UnRisk FACTORY, under an interest rate curve, which has been set up in Mathematica - the valuation has been performed by the use of UnRisk-Q
Today I will describe the same procedure but the other way round, I will
- Set up a bond in Mathematica (by the use of UnRisk-Q)
- Load an interest rate curve, which has been set up and bootstrapped automatically within the UnRisk FACTORY, into Mathematica
- Price the bond under this interest rate curve within Mathematica (again, by the use of UnRisk-Q)
Here is a screenshot of the UnRisk FACTORY interest rate curve:
The necessary steps are explained in the following code of Mathematica
Conclusion: Within the UnRisk FACTORY the user can set up interest rate curves / interest rate models / all kinds of market data (being imported, bootstrapped, calibrated, etc.., automatically every night). The UnRisk Web Service enables the user to import these market data into the world of Mathematica. By the use of UnRisk-Q the user can perform valuations or analyze the behaviour of prices of instruments which the user can set up within Mathematica in a very flexible way.
Unlambda - Your Functional Programming Nightmares Come True
The Lambda calculus is a formal system for expressing computation based on function abstraction. Functional programming languages are counterpart to lambda calculus in computer science. But also other languages have been extended with lambda abstraction.
Unlambda is an (obfuscated) functional programming language designed to make programming painful and difficult. Unlambda likes unfeatures (no variables, data structures, code constructs, ..). Everything is a unary function. As algebraist I cherry-picked the concept of Idempotence.
Example from the Unlambda home page: the following Unlambda program calculates and prints the Fibonacci numbers (as lines of asterisks)
```s``s``sii`ki `k.*``s``s`ks ``s`k`s`ks``s``s`ks``s`k`s`kr``s`k`sikk `k``s`kskWriting Unlambda programs may not be too hard, but reading them is practically impossible.
Meet And Talk To Yourself 20 Years Into The Future
Begin 2010, I posted Me Talking To Myself in the Future looking playfully into the past of UnRisk from the perspective of 2012.
When things develop fast 2 years may be long and some of my short term predictions were simply wrong. We rejected automated model and method selection favoring transparency and optionality instead.
Today, I found this article in "FastCompany": Now You Can Meet and Talk To Yourself 20 Years Into The Future. 20 years, really? 5 years ago, the iPad was not introduced, I thought. But watching the video I understood … it's about our-future-self simulation with advanced technologies. Bravo!
When things develop fast 2 years may be long and some of my short term predictions were simply wrong. We rejected automated model and method selection favoring transparency and optionality instead.
Today, I found this article in "FastCompany": Now You Can Meet and Talk To Yourself 20 Years Into The Future. 20 years, really? 5 years ago, the iPad was not introduced, I thought. But watching the video I understood … it's about our-future-self simulation with advanced technologies. Bravo!
More Small Real Options - Outsmart Eager Sellers To Get Best Prices
Remember, wait-a-little can be an option.
Some (online ) sellers use algorithms to predict what they shall offer you next. There are some ways in which we can beat the system (using options after predicting how such predictors work). In principle, use a website to track prices, the smart buyer can play day-trader with such data and wait for a favorable time to buy. It's unbelievable how volatile prices can be.
This are more specific tricks:
Another real option from the blogosphere: innovators use trial installations of special online shop technologies to test markets and promotion
Some (online ) sellers use algorithms to predict what they shall offer you next. There are some ways in which we can beat the system (using options after predicting how such predictors work). In principle, use a website to track prices, the smart buyer can play day-trader with such data and wait for a favorable time to buy. It's unbelievable how volatile prices can be.
This are more specific tricks:
- Say, you buy special wines and you think the retailer who had the best price last year will have it again this year. But some online retailers with dynamic pricing have better offers to new customers than to repeat buyers. So, let the system think you are a new customer (block cookies and website data in your browser, or better use a cookie-disabled browser ...
- When making an online purchase, put your wanted wines into the virtual shopping cart and click "checkout". Provide your name and e-mail address, move on to purchase info, but dot enter your credit card details. You may get an e-mail with a special offer
There is much more in William Poundstone's book: Rock Breaks Scissors: A Practical Guide to Outguessing and Outwitting Almost Everybody.
People are predictable even when they try not to be. William Poundstone demonstrates how to turn this fact to personal advantage in scores of everyday situations, from playing the lottery to buying a home.BTW, I have especially enjoyed Poundstone's book: Labyrinths of Reason: Paradoxes, Puzzles, and the Frailty to Knowledge
Another real option from the blogosphere: innovators use trial installations of special online shop technologies to test markets and promotion
Real Options on the Small Scale
Yesterday, in To tree is the answer, Herbert praised the elegance of trees when analyzing real options. Has this topic "real options" any relevance to your individual life?
I claim "yes, it has", and it has almost daily.
A real option always comes into play, when a party (here: you) has the choice to invest or not, or to invest to a certain extent. Do you have the choice?
Think of mobile phones. In the good old stone-age of telecommunication in Austria (up to the mid 1990's), there was an absolute monopoly in the telecommunication market. Service quality was poor, and prices were high. With the destruction of the monopoly, Austria became one of the most competitive markets (concerning mobile communication) in the whole world. Customers were offered free mobile phones with their contracts (running for 2 or 3 years), and the prices per minute in a national call dropped from around 50 cent to close to nothing.
When you are up to enter a new mobile phone plan, you have to decide:
- Do I want a flat rate with many free call minutes, text messages, data volume at a higher level or do I want to have a low basis fee and higher per-minute costs?
A classical real option.
To decide it, you should know your telecommunication habits (difficult enough, because you have to make a forecast for the next two years). I am also convinced that (following Kahneman's loss aversion principle) most persons do not feel comfortable when exceeding their call minutes quota and therefore tend to have too large volumes on their contracts.
Anyway. The costs of mobile communication are peanuts nowadays.
Is this (negligible costs) also true for individual traffic? When you live close to public transport, do you need two (ore more) cars per household? Is car-renting or car-sharing a real option alternative?
I claim "yes, it has", and it has almost daily.
A real option always comes into play, when a party (here: you) has the choice to invest or not, or to invest to a certain extent. Do you have the choice?
Think of mobile phones. In the good old stone-age of telecommunication in Austria (up to the mid 1990's), there was an absolute monopoly in the telecommunication market. Service quality was poor, and prices were high. With the destruction of the monopoly, Austria became one of the most competitive markets (concerning mobile communication) in the whole world. Customers were offered free mobile phones with their contracts (running for 2 or 3 years), and the prices per minute in a national call dropped from around 50 cent to close to nothing.
When you are up to enter a new mobile phone plan, you have to decide:
- Do I want a flat rate with many free call minutes, text messages, data volume at a higher level or do I want to have a low basis fee and higher per-minute costs?
A classical real option.
To decide it, you should know your telecommunication habits (difficult enough, because you have to make a forecast for the next two years). I am also convinced that (following Kahneman's loss aversion principle) most persons do not feel comfortable when exceeding their call minutes quota and therefore tend to have too large volumes on their contracts.
Anyway. The costs of mobile communication are peanuts nowadays.
Is this (negligible costs) also true for individual traffic? When you live close to public transport, do you need two (ore more) cars per household? Is car-renting or car-sharing a real option alternative?
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