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  1. bob

    KCG $440 million trading loss- Would the axe fall on its Algorithm designer quants?

    Unbelievable that they would let that big an error make it into production. They have pissed away most of their market cap and are desperately looking for someone to buy them. Put more bluntly, in the space of a day they lost nearly half a billion dollars and essentially destroyed the company...
  2. bob

    Sex discrimination in the finance industry

    It's true that women generally may have different preferences than men generally when it comes to many things, but I'd be interested to hear why this means that the women who are interested in finance and work there somehow deserve lower pay.
  3. bob

    The World according to Americans

    I would love to visit Mesa Verde, as I've heard it's amazing, but it's a gauge of just how incredible our national parks system is that it probably does not fall in the top 10 among those I haven't seen yet but really want to.
  4. bob

    The World according to Americans

    Hm, while all of this is going on I'm thinking about the degree to which Americans don't even know their own country. For example, I've seen what I think of as a fair amount of the country but can count 17 states in which I've don't believe I've even spent the night: Hawaii, Alaska, Oregon...
  5. bob

    The World according to Americans

    I would love to contribute to this discussion, but as an American I am too provincial to know whether run-of-the-mill Americans are more provincial than run-of-the-mill citizens of this world's other fine nations...whatever they're called. However, as an American my instinct is to assert...
  6. bob

    The No Free Deliciousness Principle

    As I was watching his talk at ARPM, which was fantastic, it occurred to me that it must be something of a curse to be a funny quant.
  7. bob

    Occupy Wall St.

    I have a checkered past. But don't tell Dominic: He might take offense if I share my opinion that Derrida is more difficult than differential equations. Anyway, it seems to me that OWS (not to bring the discussion back to its original point or anything) is a fantastic example of precisely the...
  8. bob

    Occupy Wall St.

    I have to agree that the constitutional cheerleading is driven by a deep misunderstanding of US history. Far from being the richest country on Earth, the US was an agrarian backwater for nearly a century after the Revolution. What made us a "modern" country--or a country at all, really--was the...
  9. bob

    A film about var?

    Some favorable reviews over on Rotten Tomatoes. (The film is due out Oct. 21). From what I can tell, the film owes more than a little to Glengarry Glen Ross, which if you haven't seen you really should. "Coffee's for closers only."
  10. bob

    A film about var?

    "Luke, I am your subadditive risk measure." "No. No. That's impossible. That's not true!"
  11. bob

    Will negative public opinion against 'finance' affect future financial careers?

    My $0.02: (1) Negative public sentiment is affecting finance careers right now. Dodd-Frank, UCITS IV, Basel III are regulatory efforts whose particular nature and form are very much driven by the ongoing credit crisis and the perceived breach of public trust it represents on the part of...
  12. bob

    Clamping Down on Rapid Trades in Stock Market

    From the standpoint of someone who wants to transact in the market, does it really matter whether it was one, two, or eighty seven algos that produced that cycling behavior? As for the second point, here's a link to paper by the SF Fed giving a demographic analysis that projects stock prices...
  13. bob

    Clamping Down on Rapid Trades in Stock Market

    I agree that speed per se is not the problem, as long as what's actually taking place is trading. In cases like the "pretty picture" pasted in above, though, those oscillations in the NBBO are not arising from trading. As near as I can tell, it's an effort to create adverse selection in the...
  14. bob

    Clamping Down on Rapid Trades in Stock Market

    I'll let two guys with ten years experience at Instinet and a brokerage firm of their own make the argument better than I could: A good interview that gives some background: http://www.themistrading.com/article_files/0000/0576/61110_Welling_Weeden_PlayingFair.pdf A recent letter tracking...
  15. bob

    Clamping Down on Rapid Trades in Stock Market

    It just needs a good UI--something that involves a joystick and lots of movement / explosions. Do it right, and pre-adolescents will be making (losing) millions on HFT strategies from their XBoxes.
  16. bob

    Clamping Down on Rapid Trades in Stock Market

    The fact that the system in the past was neither fair nor efficient does not constitute a defense of a later, different system that is also unfair and inefficient. I suppose it depends what the limit is, doesn't it?
  17. bob

    Clamping Down on Rapid Trades in Stock Market

    Yes, but tighter spreads don't mean lower transaction costs. A case in point: http://www.nanex.net/StrangeDays/08022011/ELNK_08022011_1.jpg Woe betide the poor shlub who has to click the "Place Order" button to hit a bid here. It fluctuates by 2.5% percent of spot about every 2 seconds. I...
  18. bob

    Clamping Down on Rapid Trades in Stock Market

    I'd suggest mandating a minimum limit order persistence time and stopping sub-penny orders. None of that will prevent crashes, though; it will just level the playing field a bit and cut down on some of the more egregious games that are played. The fact is that any trader, human or machine, will...
  19. bob

    Would you really say "Martingale" in a Quant meeting?

    Well, I didn't make any promises about how I would use the word.... Anyway, to answer your question, it depends very much on the context. Yes, I could see it happening, but usually if you don't know the other participants' backgrounds it's best to stay away from technical details unless your...
  20. bob

    Would you really say "Martingale" in a Quant meeting?

    This is a great question. I'm going to try to sneak the word "martingale" into every meeting I have for the rest of this week. (The audit readiness meeting tomorrow morning is going to be a real challenge.)
  21. bob

    2011-2012 Quantnet Ranking of Financial Engineering (MFE) Programs

    Actually, I'm interested in the question previously raised of who is helped by these rankings. I can see the use for prospective students who want to make sure they talk to the right places and tailor a strategy for which places they apply to. In that vein, it might be helpful to know detailed...
  22. bob

    Well I'll be - Greece might actually do it...

    Well, the banks are getting a haircut, but the question as always is how close to the skin. I personally don't see a "controlled" default as possible here. Germany can rescue its own banking sector, but can Austria, Italy, France? If any of those were to go, then the entire Euro project is dead...
  23. bob

    Rogue Trader Lost $2B at UBS

    Just wondering when I will see the first news story concerning a "rogue trader" being arrested whose actions resulted in a $2B gain for his or her employer.
  24. bob

    Yield curve non parallel shifts - spline

    Ah, so you're shocking the underlying data rather than the discount factors? I don't know what software you're using to perform the calculations--whether canned or homemade--but of course if you're shocking par rates then you have to re-bootstrap, and if you're using a spline interpolation then...
  25. bob

    Remembering 9/11

    Nice picture, Andy. This is a lot like the view of the site that I have from my desk every day. Of course we will not forget, but to me after 10 years it's fitting that the emphasis be on what's to come. I had only lived in NY for a few years when 9/11 happened, but my recollection of the WTC...
  26. bob

    Yield curve non parallel shifts - spline

    Typically you would do an error-minimization procedure only to generate the base curve. You then price or do risk on other instruments as if that is the one and only rate curve. It may seem a little contradictory, but of course you have to acknowledge that the curve is an idealization that makes...
  27. bob

    Yield curve non parallel shifts - spline

    Hey Joy, I'm certainly not an expert in curve-stripping or splines. If you're interested in reading someone who is, you might check out this post by Donald van Deventer and others from the same series on his blog...
  28. bob

    A 50 year bond by Fed?

    They should just give it up and issue perps.
  29. bob

    Help the SEC understand what an ETF is.

    I love ZH, but you need a very discerning eye to read there. Some real nuggets of gold (pun intended) are to be found, but you have to watch out for the rumormongering, distortion, innuendo, and outright propaganda. In other words, it's a lot like watching CNBC, only with the occasional bit of...
  30. bob

    The Worlds First Ultraportable 15.6" Laptop!!??

    You would be surprised to know how anti-Mac Alain was once upon a time....
  31. bob

    The Worlds First Ultraportable 15.6" Laptop!!??

    Hm, from the review it sounds like you could probably cook a grilled cheese underneath while you're using it, too. Nice bonus. I really don't understand the MacBook comparison, frankly. I've always had PC's at work but always owned Apple products, and you know writing MS-DOS batch files, and...
  32. bob

    US treasuries 20yr+ yield , up or down?

    There is rampant speculation that the much-hoped-for QE3 will include maturity extensions that have them buying not just the 10Y but the 30Y also in large amounts. No doubt some probability of this outcome is "priced in," but should QE3 become a reality I think 30Y yields would drop, at least...
  33. bob

    mathy shows

    I like Fringe, too. Never could get into Numb3ers. It seemed to me to do for math / statistics what CSI does for forensic science: Endow it with magical powers that confer near-omniscience on its practitioners. It's sort of a science-as-magic, or even -religion, premise that not only grates on...
  34. bob

    Which book and course is better to study Finance?

    It's difficult for two courses about "finance" to take more different approaches to the subject, really. Both are views of the world that somebody who wants to be educated in the technical side of the discipline should know. The first course is what I think of as the CAPM, Markowitz Portfolio...
  35. bob

    Isn't this joke ambigious?

    Mostly as a result of the discussion here, I have decided that this is the least funny joke I have ever encountered.
  36. bob

    London riots

    It sounds terrible. No doubt we here in the US could show the world a thing or two about rioting, given how heavily armed we are by and large, but with the NFL lockout ended and the new season of American Idol coming up, I'm not sure we can really squeeze it in. Next year, maybe.
  37. bob

    S&P Downgrade Effects

    I have had occasion to speak with a number of MM fund providers over the last year or two concerning SEC-mandated stress testing, and it has been made clear all along that these funds are permitted to treat all US government debt as free from default risk. It would be very odd for an agency of...
  38. bob

    2011 Apple MacBook Air 13" Powerful enough to handle MFE class ??

    Please note that Microshaft, in a stroke of brilliance, made the decision to stop supporting VBA for Office 2008 for Mac, just as Mac's share of the PC market began to skyrocket. The 2011 version of Office once again supports VBA, so as long as you get the correct version, you should be fine.
  39. bob

    S&P Downgrade Effects

    It's a very strange time, that's for sure. I think those here who are opining that the market has "priced it in," the rating agencies are somehow late to the party, and capital markets have the whole thing under control may be parroting a party line that doesn't apply in this instance. The...
  40. bob

    Path-Dependent Monte Carlo

    Well, pretty much any case someone posts in answer to this question is practically begging for someone else to come in with a link to some paper somewhere showing there's a PDE method that's appropriate. So I won't claim that you HAVE to use MC for the following deal I came across recently; I...
  41. bob

    Delta-Gamma Approximation

    Fixing time, you can interpret the option price (V) as a function of spot (S) and vol (\vega), arriving at the Taylor series approximation for changes: (\Delta V \approx \frac{\partial V}{\partial S}\Delta S + \frac{1}{2} \frac{\partial^2 V}{\partial S^2}\Delta S^2 + \frac{\partial V}{\partial...
  42. bob

    What books are you currently reading?

    We don't have HBO, so I'll have to wait until it's out on DVD. But a friend of mine whose judgment I trust a great deal in these matters says he really likes the adaptation.
  43. bob

    What books are you currently reading?

    I haven't read The Wise Man's Fear yet, either, but my wife tells me she likes it a great deal. This is backed up by the cumulative number of hours past her preferred bedtime she's stayed up to read it. Reviews on Amazon show that some are blown away, others are a bit disappointed. Not too...
  44. bob

    What books are you currently reading?

    The Name of the Wind, Patrick Rothfuss--re-reading it, actually, since the second book in the series just came out, and my wife is almost finished with it. For any of you who like alternate-world fantasy (a la Song of Ice and Fire, which I saw mentioned above, and which a lot of people seem to...
  45. bob

    Greece pulling out of the euro?

    Yes, as I've said elsewhere on this forum on essentially the same topic, this I think is what the fiscal consolidation process looks like for the EU: The core gradually gains all real fiscal control over the periphery through an extended debt crisis. I think memories of two continental European...
  46. bob

    Where to roll?

    Hadn't looked at that, but it appears that the OY indexes out there rebalance according to the contract over the next 13 months that maximizes backwardation / minimizes contango. I'm no commodities trader, but I would think that means the contracts you wind up long are going to reflect...
  47. bob

    Where to roll?

    If the commodity you're interested in is part of the GSCI, then you might look at how they roll that index.... http://www2.goldmansachs.com/services/securities/products/sp-gsci-commodity-index/roll-period.html ...and plan accordingly, if you know what I mean.
  48. bob

    What's the correct definition of a call swaption?

    What I'm saying is that payer/receiver (and cap/floor) are the standard conventions. That way it doesn't matter which way the parties involved happen to think of it in put / call terms. Edit to add: Since you made me curious, I went and checked some actual swaption trade confirms to see how...
  49. bob

    What's the correct definition of a call swaption?

    I actually had a slightly funny miscommunication with a guy I work with over this. I think of a payer as a call on the swap rate, since you would exercise a payer when the rate at expiry is higher than strike, a receiver when it's lower, and it seems very straightforward to me. He, however...
  50. bob

    business climate proxies?

    Just to add to the previous post, if you're looking for bond-related indexes, the standard benchmarks are usually Lehman Agg (now I guess called Barclay's Agg, although that still sounds funny to me), with its various subindexes. Merrill Lynch (BofA) and Citi both produce broad bond benchmarks...
  51. bob

    business climate proxies?

    There are all sorts of indicators out there that could conceivably be useful for an analysis, depending upon what you're after. The various flavors of CPI / RPI are closely watched, obviously. You might also look at the Institute for Supply Management's Purchasing Managers Index (PMI); along...
  52. bob

    Honest to the point of recklessness

    Honest to the point of recklessness
  53. bob

    S&P , US - Go!

    As the saying goes, "Don't fight the Fed." S&P is basically saying what everyone has known for a long time, but don't underestimate the significance of the fact that it is being said at all this way. The effect may not have been reflected in today's price action, but Helicopter Ben won't always...
  54. bob

    For-Profit Colleges Mislead Students, Report Finds

    Saw that Smith essay today and thought that it was a bit overblown in rhetorical terms, but in essence the idea is right. Its larger scope is that the higher education system turns out an astonishingly large number of heavily, heavily indebted students right out of college. I frankly think it's...
  55. bob

    Black Scholes PDE

    To elaborate further, both \(N(d_1)\) and \(N(d_2)\) are risk-neutral probabilities of exercise. In the familiar money-market numeraire, this is a call option and \(K e^{-r \tau}\) is the quantity of the numeraire asset that must be paid on exercise. Since our numeraire asset never "changes...
  56. bob

    NYC Drinks - QuantNet meet up?

    Unless you prefer to be referred to using the feminine pronoun, Richard, it was your partner I was referring to, not you. In any case, as one n00b to another, good game. Perhaps at the next meetup we can have a rematch...um...earlier in the evening.
  57. bob

    random alternation

    For something like this where a simulation is quick to code and run, it's useful to have a result in hand so you can know whether the analytic result you work out is right. So it's not a bad first step, really. But, you're absolutely right, the numerical answer is not really the point in a case...
  58. bob

    NYC Drinks - QuantNet meet up?

    Yes, we did bow out on our third game. I'm afraid I didn't catch her name, but there was a ringer there who played Division I-A b pong in college or something like that. My liver was grateful that our winning streak didn't last....
  59. bob

    Newest child prodigy

    Yes, it was pretty much at this point, at the tender age of 18, that I really got the memo that I am not a mathematician. I can hack my way through it, but it isn't pretty. Fortunately, I've also found that you don't have to be a mathematician to make yourself useful in finding a good...
  60. bob

    Sitting in an English garden waiting for the sun.

    Sitting in an English garden waiting for the sun.
  61. bob

    This is highly relevant.

  62. bob

    This is highly relevant.

    Clearly this guy has horribly underestimated the powers of Helicopter Ben.
  63. bob

    Ah, to be a billionaire ...

    I'm no ace at political writing, but there are all sorts of things to try that I think would be more interesting to read. One way would be via the particular: Rather than making assertions about "billionaires in region X," actually give us a billionaire perp walk. I desperately want to know how...
  64. bob

    Ah, to be a billionaire ...

    I'm not really sure how to take this piece. If he's trying to be a pampheleteer, then his writing is hackneyed and as a result lacks rhetorical punch; he also fails to include a call for any sort of real action, so the impression ultimately is that the piece is a litany of cliches. I can't...
  65. bob

    Help Me Choose Where To Go For Undergrad

    In the deep, dark misty past I turned down a couple schools with bigger names to go where I did because I was offered free tuition. But at the time it was clear this was (a) already an excellent school that was (b) making a definite effort to raise its national profile and aggressively pursuing...
  66. bob

    NYC Drinks - QuantNet meet up?

    I think after the Stochastic Control class that day, a few drinks will be in order. See you there....
  67. bob

    Databases and SQL- where to start?

    Thanks for the recommendation. I will definitely check this out.
  68. bob

    Databases and SQL- where to start?

    I use SQL on a daily basis and actually can make it do some fairly nifty tricks. (I recently implemented some needed functionality for our production software via script that our development staff considered "too hard" to build into the UI proper.) But I've never "learned" it in any formal...
  69. bob

    I am Hedge Fund partner and it's not that great

    A couple other thoughts on this: Not to shill shamelessly for my current employer, but there are mature service offerings in the market that allow funds to outsource most of their middle- and back-office functions so they can concentrate on what they do--managing assets--rather than...
  70. bob

    Japanese tsunami disaster discussion

    The comparison to Chernobyl is understandable, but not all that illuminating. The RBMK reactor has terrible design flaws and was being operated well outside its intended range. The reactor had no primary containment at all and experienced an excursion that led to a steam explosion powerful...
  71. bob

    Japanese tsunami disaster discussion

    Excerpts of some emails from folks on the ground this morning.
  72. bob

    Markov chain problem

    (p_H = \frac{1}{3}) (p_T = \frac{2}{3}) It's the eigenvector of the transition matrix with eigenvalue 1.
  73. bob

    Happy Pi Day Everyone!

  74. bob

    Buffett slams Black-Scholes and 'flat earth' economists

    I imagine Buffet is thinking in terms of what you might call an actuarial valuation of these positions: If you take the historical perspective, in all likelihood the chances that these puts wind up in the money are, he would say, overwhelmingly small and thus merit a small valuation. No doubt...
  75. bob

    Buffett slams Black-Scholes and 'flat earth' economists

    Um, okay Warren. He has revealed himself repeatedly as either hypocritical or willfully blind in recent years. A guy who famously called derivatives "financial weapons of mass destruction" sells huge quantities of naked long-dated index puts as a business strategy? (In some ways worse than...
  76. bob

    Forbes billionaire List - Investors version

    By the time we get to QE15 or 16, they'll have to start publishing the trillionaire list.
  77. bob

    Gaussian copula and credit derivatives

    Perhaps this will help you get you started; it's something I posted some time ago in response to a question about t-copulas used to model nth-to-default baskets: http://www.quantnet.com/forum/threads/student-t-copula-in-excel.3661/#post-31683 It does Monte Carlo to simulate correlated t's and...
  78. bob


    "Though justice be thy plea, consider this: That in the course of justice none of us Should see salvation. We do pray for mercy, And that same prayer doth teach us all to render The deeds of mercy." (The Merchant of Venice, IV.i.193-197) Sorry, couldn't resist. Yes, of course, trust is...
  79. bob


    Nice sound bite, but.... Bankers have historically been somewhere below tax collectors on the popularity list. The Knights Templar got their thanks for developing the first modern banking system at the hands of the Inquisition. This does not appear to have interfered materially with the eventual...
  80. bob

    Can a GRE taker answer questions incorrectly and still get 800Q ?

    I'm actually not certain how the GRE's engine handles this. As near as we could tell from the GMAT engine years ago, they would take the score estimate when time ran out and just prorate it (scale it down linearly) based on the percent of the section completed. It is possible that they do this...
  81. bob

    A Primer for Success for Women in Investment Banking

    I'm actually inclined to agree with a good bit of what you say, but at the same time I'm suspicious of that impulse. After all, it's easy for people to say they treat everyone equally in a professional context, but what they really mean to say is that they treat people fairly as they judge the...
  82. bob

    A Primer for Success for Women in Investment Banking

    As a holder of this particular daffy bimbo degree (fortunately not the only one I hold), I can tell you that whatever respect you may or may not afford it... (a) It is a surprisingly difficult degree to get from a program that's any good. Most classes are on the order of 10 or less, with many...
  83. bob

    MBS market vs Interest Rate job

    I think there'll be lots of demand for inflation and IR products--especially for protection against rising rates--coming up. A vast hunk of the world's capital is held by vehicles with huge exposure to these two risk factors. Going forward, as has been pointed out this is probably the most...
  84. bob

    Brownian motion

    Hm, well in the 3-case the ({1,2,3}) and ({3,2,1}) cases are equivalent, each with probability (\frac{1}{2^2}). There are 4 permutations left, each of which is a single exchange of adjacent elements away from one of the strictly increasing / decreasing cases, and each of which evidently has...
  85. bob

    Brownian motion

    Okay, as it turns out the original post had the right idea, but after a crazy day my execution was a little off. As I understand the problem, (B_1) is a bit of a red herring. We're looking essentially for the probability that the second Brownian increment (x=B_2-B_1 > 0) and then the third...
  86. bob

    Brownian motion

    Hm, cool problem. ...but the answer I initially had was wrong. Too bad, really.
  87. bob

    Structured Finance Interview -HELP!

    Actually, the market for new deals is better--and worse--than you think. There was a large national conference in Florida a few weeks ago, and what struck me in the press coverage coming out of it was that analysts were willing to be so candid. One S&P analyst was quoted as saying he couldn't...
  88. bob

    Travails of the Celtic tiger

    The only structural way forward is to undermine the legitimacy of the state...in peripheral countries anyway. In the US the idea of state sovereignty as an effective concept took a couple centuries to thoroughly kill, and involved at least one rather bloody war you may have heard about. And this...
  89. bob

    Travails of the Celtic tiger

    I find it hard to imagine German-speaking Poles being less well liked in Germany than they are now. Unless they play striker for the national team, of course. There is a lot of talk about the inevitability and even wisdom of Greece or Ireland (or, judging by recent yields, now Portugal)...
  90. bob

    US Treasury to sell bonds with maturities of 100 years

    It's an interesting case to ponder. I believe the UK actually has some experience with this, since I seem to recall seeing somewhere that they issued a perp during WWI. Perpetual callables / convertibles are fairly common in the corporate space, but this is the only perpetual sovereign I'm aware...
  91. bob

    MIT MFin MIT Sloan MFin program extended deadline

    Yep, have begun to see some interest for modeling longevity swaps here. As far as I can tell, this instrument hasn't yet moved from the actuarial domain (i.e., pose a survival model--most appear to be adaptations of the Lee-Carter model--and fit it to historical data) into the risk-neutral one...
  92. bob

    Hi John You got a 99 on the final and would have received an A+ if they were given. Bob

    Hi John You got a 99 on the final and would have received an A+ if they were given. Bob
  93. bob

    Interview Questions at JPMorgan Sales and Trading

    The payment per unit time is the same no matter which frequency you pick. So the option with both the highest time value and the least credit risk is the same: The highest possible frequency.
  94. bob

    Interview Questions at JPMorgan Sales and Trading

    Defined-benefit pension schemes are essentially short a fixed-income instrument of very long duration. So, from a mark-to-market perspective, an increase in interest rates causes the NPV of the liabilities to decrease. Moreover, since usually the duration of the liabilities far exceeds the...
  95. bob

    Interview Questions at JPMorgan Sales and Trading

    Wow, there is a serious lack of common sense prevailing in this thread. Anyway, I find this question interesting... ...since in some sense all three possible answers--that they decrease, remain the same, and increase--can be argued to be correct.
  96. bob

    Master list of free financial data

    Depends what exactly you need. As you probably know, MarkIt is the standard vendor in this space but is pricey. Fitch has a similar product (called ValuSpread, which is a horrible name) that is less expensive, and I have had a good experience with their data. The other possibility is to see...
  97. bob

    Variance calculation

    That's not quite right. Take six derivatives of the MGF to see why.
  98. bob

    Variance calculation

    Yes, that's right.
  99. bob

    put call parity-question

    \(C-P=S_0-Ke^{-rT}\) Since \(S_0 = K\) is given: \(C-P = K(1-e^{-rT})\) \(e^x\) is convex, so: \(C-P <= K[1 - (1-rT)]\) \(C-P <= K*rT\) Can't see how you get rid of \(T\), though.
  100. bob


    ...and a little practical advice on being an equity trader now...
  101. bob

    NYPD bust Columbia University coke, LSD, pot ring

    A suggestion from The Onion on how to handle cases like this: http://www.theonion.com/articles/tonys-law-would-require-marijuana-users-to-inform,1298/
  102. bob

    Optimum bond portfolio selection

    This is actually quite a difficult problem; how you approach it depends upon the type of liabilities you have and what you construe "optimal" to mean--i.e., what the goals are. In real life, Asset Liability management (ALM) is a big deal for both operating entities and money managers, pension...
  103. bob


    Now he has agreed to pay a visit to Scotland Yard to answer some questions. Should be interesting. I hope for his sake he inspects any tea he's given with a geiger counter and politely declines the offer of an escort out of the building via the parking garage.
  104. bob

    Need opinions on Quant Finance Teaching Position

    It doesn't sound to me as though you're being difficult. Given the value you provide for the program, it seems perfectly reasonable to ask for a form of compensation that they can provide you without incurring additional cost. More to the point, it sounds to me as though you take the welfare...
  105. bob


    'Who controls the past' ran the Party slogan, 'controls the future: who controls the present controls the past.'
  106. bob

    Quant programs MUST CHANGE - Pablo Triana

    Those who know me would, I hope, not hesitate to attest to my credentials as an amused skeptic when it comes to many aspects of this field we all know and love. Still, I guess I believe in the project if not, maybe, its particulars, and evidently Triana (Can I just call him Mini-Taleb?) is in...
  107. bob

    Can a GRE taker answer questions incorrectly and still get 800Q ?

    I don't have empirical evidence that this is not exactly right, but I do know how adaptive engines work, and depending upon the implementation ETS uses (I know the GMAT's implementation pretty well, but the GRE's has some oddities), it ought to be possible to miss the first question and still...
  108. bob

    Paul Wilmott: most quants are stupid

    More than you think, I would wager. The same could most likely be said of traders, salesmen, and other practitioners in the business. Still, in the heat and light of actually doing the work one has (perhaps) chosen, I find that while it may not be unusual for people to consider broader...
  109. bob

    Undergraduate needs suggestions/help!

    Obviously this is a sample of one, but an old high school and college acquaintance of mine works for a large PE firm, and he does happen to have a PhD in math. But what actually got him into that line of work is a few years in a consulting company, and then--and most importantly--several more...
  110. bob

    Moody's Mega Challenge is now Open

    I hear this year's problem is sovereign credit ratings... :-k
  111. bob

    2 Ivy League Drives Shame Seniors Who Don't Give

    To me the technique doesn't seem to be particularly ideological. Shame is a time-honored method of enforcing social conformity. See also: Japan.
  112. bob

    Mathematics for non math savvy

    Hm. Not sure how precisely you mean the question, but you may want to read a bit about Goedel's incompleteness theorems. In that context, the answer to this question is no.
  113. bob

    Advances of Risk Management from SunGard and IAFE

    Sort of an odd document. I think the individual responses in full, while less well suited to Wall Street attention spans and political realities, might make for a more interesting read.
  114. bob

    Does anyone know how to replicate VIX using S&P options or futures?

    Spot VIX, no, but VXX is pretty much the only place anything like that is traded--and VXX is a weighted portfolio of the two front months of VIX futures, which is the real fundamental instrument. The futures can actually be replicated (in theory) because their maturity is a fixed time. You...
  115. bob

    Does anyone know how to replicate VIX using S&P options or futures?

    Simple enough: It's the square root of the par variance swap rate (and thus not an estimate of volatility per se): http://www.cboe.com/micro/vix/vixwhite.pdf
  116. bob

    Anyone watching Wallstreet 2?

    "It seemed as if an older, tired Oliver Stone wasn't really interested in, you know, Wall Street and greed. He was interested in the clothing. The only scene he did with interest, it seemed to me, was when Michael Douglas gets a new wardrobe." "But it's utterly…It's like a schoolboy who just...
  117. bob

    China to Introduce Credit-Default Swaps by Year-End

    We'll actually talk about this in class 4 or thereabouts. But I'm not averse to spoiling my own punchlines over beers.
  118. bob

    Formal Methods - Z notation

    Thanks! Your posts always remind me that the way we do things around here isn't as f'ed up as I used to think it was.
  119. bob

    Living in NY

    I've lived in Brooklyn ever since moving to NYC in the late 90's, and for much of that time I was a reverse-commuter (teaching or taking evening classes at various times) and can say it is very practical and easy and, yes, is less stressful than moving with the rush-hour flow. And, although I...
  120. bob

    Goldman plans to spin off prop trading

    Looks like they will be spinning off all or part of their PE operations as well. I will be very interested to see what the resulting structures look like, and who else is involved in the deals.
  121. bob

    UBS quant interview question

    Yes, all these are pretty much equivalent. It may be easier to think about generating the final number from the choices of the middle digits (b) and (c). The choice is subject to the constraint: (b > c+1), and of course both must be valid digits. After that, you simply take 9 times the...
  122. bob

    Starting to feel like 1932

    My feeling is that, 100 years from now, people will look on the whole period from the dot-com bust--2000, painting with a broad brush--all the way up through now and on to whatever follows as a single epoch. I doubt it will look as severe as the Depression from that perspective, but it's...
  123. bob

    Where to watch World cup for free

    Courtesy bump for others who, like me, are stuck at work this morning.
  124. bob

    Paul Wilmott: most quants are stupid

    Totally agree. From where I sit, modeling is about coping in a world of incomplete information, and about doing the best you can to capture how the world does work, rather than how it ought to. It's not that the pretty math with a solid theoretical foundation has no place, but for every useful...
  125. bob

    Financial Politics

    There will be an effect; what it is won't be apparent until the law is passed and parsed. The "parsing" step is important, since often even the agencies charged with enforcing a law need quite some time to understand it and decide what it actually means. There are always opportunities in...
  126. bob

    Google opened up their own trading floor

    Nothing. But the guys over there are pretty smart: They've seen companies like GE fall prey to scope creep and pay the price for it. The description Andy has cited above is accurate.
  127. bob

    Google opened up their own trading floor

    Your assumptions about what they are doing are, as far as I know, mistaken.
  128. bob

    Goldman Harvard Recruit Pledges to Do No Harm, Fights for Oath

    I also believe a code of ethics should be instituted for those who work in retail. I have had terrible meals that could have been prevented if only the cook had been properly instructed as to his professional obligations.
  129. bob

    Tips to future New Yorkers

    Beware of the coyotes: http://www.nypost.com/p/news/local/manhattan/coyotes_roaming_manhattan_yAm8a3Yl2ZdmClz3C28CPN
  130. bob

    What are you listening to now ?

    Recently have been listening to a lot of Uncle Tupelo and Son Volt. Plastic grocery bags fly from trees Proud symbols of a cavalier progress Memories and landscapes in triage Disappearing averages, permanent changes No jury will have the final say Everyone knows the jury is guilty Faced with...
  131. bob

    Question for New Yorkers

    Depends a lot on the buildings, but in terms of neighborhood comparison, I personally would prefer Riverside and 83rd. I worked for several years at 84th and Broadway and liked the area very much.
  132. bob

    Dow down 1000 pts..what the hell

    Some excellent audio of an S&P pit trader as the madness transpired: http://www.zerohedge.com/sites/default/files/Market%20Crash.mp3 [[Edit to add:]] No, the link isn't broken. The site is run on a shoestring and has a large readership, so often--especially on down days, it seems--there's...
  133. bob

    Dow down 1000 pts..what the hell

    Ordinarily I would agree, but I have seen several occasions in recent months that seemed to me at the time like big blocks just got dropped suddenly on the market, resulting in quick spikes down. Of course I could easily be wrong, but to me at the time they seemed like singularly unwise ways to...
  134. bob

    Dow down 1000 pts..what the hell

    Yes, the possibility exists. It's a big risk to try to shock the market by dropping a huge block and seeing what happens, but at least in concept you could have made a tidy sum in just a few minutes today if you knew what was going on and nobody else did.
  135. bob

    Dow down 1000 pts..what the hell

    Everybody get ready for the algo witch hunt.
  136. bob

    We are Wall Street ... we are smarter

    What a Trollish little letter. It's true that there's a great deal of self-serving rationalization that goes on in the financial industry to justify outsized compensation. At the same time, I find the superior attitude that seems to have taken hold toward the industry--and in particular its...
  137. bob

    Black model question

    Black's formula, as you point out, isn't so much a different model from BS. It's the same model expressed in terms of a zero-coupon bond as the unit of value (called the "numeraire") instead of the money-market account. To illustrate the difference, consider the simplest of contracts to hedge...
  138. bob

    Greed is good

    I agree--let's not overemphasize the importance of Rand in the larger discussion of greed as a supposed social good. Harvard historians have done a good job of emphasizing the role of religious freedom in European conquest of North America, as usual downplaying the colonists in the South who...
  139. bob

    Greed is good

    Totally agree. If Rand's work were merely boring, it would be harmless. But her ability to disguise nihilism as utmost virtue is socially pernicious. Artistically, the delight she evidently takes in abusing her characters tells me everything I need to know. I disagree completely with...
  140. bob

    The Master Happy Birthday thread

    Happy birthday, Vadim! Here's your cake: http://www.youtube.com/watch?v=bu6Gx43RIfs
  141. bob

    SEC requires Python for ABS deals

    Complicated is better than complex. Complex is better than simple. In the face of ambiguity, smile and bill another hundred hours.
  142. bob

    SEC requires Python for ABS deals

    Python is simple and readable. I'll take 2 pages written in Python to explain the liability structure over 200 pages written in legalese any day.
  143. bob

    “Hot Girls” Still Love Wall Street

    Funny. Have you seen the pictures? http://www.fashionmeetsfinance.com/photo_gallery.html Much dorkier-looking crowd than the ad in WSJ--sorry, article--would lead you to believe.
  144. bob

    Quants' Perception of Southern Methodist University?

    As a Rice alum, I must beg to differ on this one.
  145. bob

    Baseball season is up on us

    Go Braves!
  146. bob

    What If Women Ran Wall Street?

    If the tiger won't eat the lamb, doesn't the tiger starve to death?
  147. bob

    iPad, do you iWant?

    Nobody has the killer app (that is, appliance) yet. When the iPhone / iPod / iPad / Kindle / netbook singularity happens, I will buy. Until then, I'll make phone calls on my crappy little cell phone, destroy what remains of my hearing with my iPod, and let everyone else get carpal tunnel with...
  148. bob

    VaR with monte carlo

    Good question. There are a number of issues relating to historical data, some of which Pat has touched on. One major one is the scarcity of data--or relevant data, anyway. Typically, for historical VaR you generate historical transitions in the needed market data, treat these as samples from...
  149. bob

    VaR with monte carlo

    Monthly equity returns are much closer to normal than, for example, daily returns are. Monthly returns may not, however, be a particularly useful data set for an actively managed portfolio if holding times are generally less than a month. Doing risk without considering the joint behavior of...
  150. bob

    VaR with monte carlo

    Congratulations, you have just identified problem #1 with MC VaR. Problem #2 is that you want to represent some sort of correlation structure among the assets. The most straightforward method is to choose some historical data for your n assets, generate the covariance matrix on the excess...
  151. bob

    Student t copula in Excel

    Having never done a t copula before, I decided to give it a whirl. The attached is a very simple implementation for 3 names: It assumes zero interest rates and continuous payments on the premium leg, so obviously it's a tad unrealistic. But it does price all the single names back to their...
  152. bob

    The Story of the CDO Market Meltdown

    Uh...yeah. Anyway, yes her point that the CDO^n = 1, 2, 3,... market existed primarily to use excessive supply of mezz bonds to meet the demand for IG bonds is spot-on. It is also worth noting that the primary thrust of most government intervention since the bubble began to deflate has been to...
  153. bob

    Which of the following are the most important courses :

    Not exactly an answer to your question, but here are two undergrad courses that are more important for this area than those listed above: mathematical statistics linear algebra ...both at a pretty rigorous level Actually, if you've never taken a good OR intro (linear/integer programming...
  154. bob

    Don't Be Normal

    Two articles I came across in the course of other reading today that I thought might interest the community. Forgive me if these are dupes of links already posted. Both are interesting for their own reasons, but what prompts me to post them together is that both demand the use of power-law...
  155. bob

    Something I was thinking in terms of rating quality of MFE programs...

    Other aspects worth considering here are market and capital access. Even a great chef can't do much with a Coleman stove, a box of Ritz crackers, and a jar of peanut butter. If your area is rates or credit, it's basically impossible for an individual investor to access even the vanilla...
  156. bob

    Superbowl XLIV prediction

    Take the Colts, give the points; take the under.
  157. bob

    Obama steps up campaign against Wall Street banks

    Yes, or start up a hedge fund with an initial capital infusion from Commercial Bank A that's debt in the capital structure but gives the borrower the option to defer interest payments, the lender the option to extend, and links the coupon to fund performance....
  158. bob

    Obama steps up campaign against Wall Street banks

    Should be fun coming up with securities that fit the technical definition of commerical loans but have the characteristics of prop trades.
  159. bob

    Quantization and its numerical applications

    The foundational paper is incredibly general--that is, abstract. I don't have the time or really the background to process it. However, I've experimented in a primitive way with Gaussian discretizations and can identify a potential problem with these N-codebooks: They are constructed to...
  160. bob

    Study: cleaners worth more to society than bankers

    http://www.telegraph.co.uk/health/healthnews/6034988/Death-toll-from-hospital-bugs-hits-new-high.html Just think how much value they'd be creating if they were actually doing their jobs!
  161. bob

    top 200 jobs 2010 jobs rated

    " In my journey to the end of night, I must rely not only on dialectical paths of reason. I must have a good solid automobile, one that eschews the futile trappings of worldly ennui and asks only for basic maintenance. My Dodge Dartre offers me this elemental solace, and as interior parts fall...
  162. bob

    top 200 jobs 2010 jobs rated

    Ah, Max, you beat me to the punch on 11. Philosopher. I still want to know, though.... What if that were an actual job? Like, you hop up on Monster and find out that the State of New York is looking for an onsite philosopher for a DMV branch out on Long Island. What would the job interview...
  163. bob

    help decide.. MS-Operations Research at GA Tech or MS-EMS at Columbia?

    It's not clear to me what exactly your concentration is, athough I assume you're interested in the finance angle, given where you're posting. I should say I'm biased, since my father was on the faculty at Tech until he retired, is still listed as an emeritus professor on the QCF website, and...
  164. bob

    Controversial Religion thread

    "I have never read any theologian who claims God is particularly interested in religion, anyway." --Annie Dillard, Pilgrim at Tinker Creek
  165. bob

    Harvard's Bet on Interest Rate Rise Cost $500 Million to Exit

    But maybe the greediest. There's a bit of sleight-of-hand going on here. Swapping floating-rate liabilities to fixed-rate liabilities is a hedge: You sell both your upside and your downside in return for the ability to plan. This is risk transfer--the nominal purpose of swaps to a fund like...
  166. bob

    Wall Street Smarts - NY Times article

    The article accurately teases out the subtext of a lot of the anti-quant talk going around--and somehow actually manages to defend it, which is a trick. Finance used to be run by boys like me who had the right parents, went to the right schools, made the right friends, dressed well, and had a...
  167. bob

    The Master Happy Birthday thread

    Thanks, all, for the kind wishes. You really made my day.
  168. bob

    Getting raw real-time option data

    OPRA is the only one I've seen, which is a horrendous amount of data in a horrendous format, but actually gives intraday options bids and asks. WRDS, which is available through the Baruch library website if you're a student here, may have intraday data, although I've only ever gotten daily...
  169. bob

    Black Scholes failing to solve near expiration

    Run your code in whatever debugger you have. Near expiry the price of the option will be very close to intrinsic; your iteration is probably hitting a negative vol. Use boundary checking, or use a method such a false position that keeps the iteration on a specified interval.
  170. bob

    martingale & filtration

    The question is wrongheaded--like demanding to know what the application of a compact vector space is. A filtration is part of the foundation required in order to discuss stochastic processes and be sure you're not screwing it up. I offered the stock price example as an illustration of the...
  171. bob

    martingale & filtration

    The simplest way to think of a filtration is just as the accumulation of information. For a random variable that evolves in continuous time, a filtration adapted to that evolution is one where the entire history of the evolution, up to and including the present time, is known. This sounds like...
  172. bob

    Data Structure for Matrix Implementation

    Yeah, it was a lot of work, but fun for me, since I was a C++ newb coming into the program. It was a great introduction to how (and how not) to build a class. I used mine all the way through Dan's courses. But eventually I had to move away from it. The watershed was trying to implement QR...
  173. bob

    Adjusting from cookbook math

    If a further hint is required, then you might try devising a recursion formula for (A_{n+1}) in terms of (A_n). Although it may not be in the spirit of the question, it looks to me like there is a way that doesn't require a Taylor series argument. Consider: (\lim_{x \rightarrow...
  174. bob

    Perception: something to think about

    Or maybe they don't take the subway very often....
  175. bob

    Perception: something to think about

    I know you're only agreeing with me in jest; nevertheless, I would press the point. Perhaps the explanation is not that we have no time for beauty, but that hardly anyone finds Bach beautiful.
  176. bob

    Perception: something to think about

    Perhaps this is more a statement about high versus low culture than it is about how much attention we're paying. To verify this, you might try having Chris Rock spend an hour doing stand-up in the same spot unannounced. Bet the result would be rather different.
  177. bob

    "MFE program profile evaluation" master thread

    Best of luck. I would also point out from my own experience that retooling to become an FE--or any of several other things--in your thirties is not, despite what your 24 years of accumulated wisdom may tell you, the end of the world. I'm even able to get out of my wheelchair now and then to...
  178. bob

    Is A Case Of Quant Trading Sabotage About To Destroy Goldman Sachs?

    The new site for this blog is www.zerohedge.com. Looks like there are a number of contributors; most post via pseudonym. I stumbled across the site looking for information on a different topic, and what I found on it was good. The post from RobotTrader yesterday makes for some entertaining...
  179. bob

    Credit Derivatives Research Papers

    Two papers from Brigo describing the theoretical framework for and common pitfalls of adapting standard market models to single-name and index options as well as other volatility-dependent instruments such as CMCDS.
  180. bob

    What are the key characteristics of top students in MFE

    Notwithstanding Andy's imposing set of requirements (I might satisfy one or two), here's what I see as being useful, aside from the obvious ones of being fairly smart and willing to work hard: Be flexible. Finance is a social science. As pretty as the math looks at times, and as much as some...
  181. bob

    What Kind of Censorship Dictatorship is This?

    If it helps you feel any better, I get the value of the game as 1217.9887339551201. ...and stopping is never optimal with that choice of payoffs.
  182. bob

    R: anderson-darling test

    Google is good: http://cran.r-project.org/web/packages/adk/adk.pdf
  183. bob

    Treasury may tighten grip on risky derivatives

    The real questions in my mind are how you define the universe of "derivatives, " how your electronic representation system copes with novel products, what the law is concerning derivatives that the system isn't set up to handle, how the regulatory system evaluates the efficacy and quality of...
  184. bob

    Clifford Asness VS Barack Obama

    As a joke a couple weeks ago, I suggested here at work that the government give the company to UAW to let them see what it's like being on the other side of the table for a change. Turns out somebody else in the White House has a sense of irony. As for Perella, it's difficult to shed too many...
  185. bob

    Python Workshop - May 2, 2009

    You might want to try: trim_str(" ") More efficient than mine, but still more vigorous than it absolutely has to be. Can't see a lazy way to do it in one line, though.
  186. bob

    Python Workshop - May 2, 2009

    What I have for 1.1 works, but seems horrible: def my_strip(inString): # There must be a better way. return inString[max([0]+[x for x in range(len(inString)) \ if inString[:x].isspace()]):\ min([x for x in range(len(inString)) \...
  187. bob

    FYI: new CDS conventions in North America

    Thanks, Tim. This wrinkle hadn't occurred to me until the paper pointed it out.
  188. bob

    Prof. Salih Neftci (1947-2009)

    His classes were a feast of ideas spiced with his sharp wit. It's sad and shocking that we've lost his voice so soon.
  189. bob

    Help: calibrate Hull-White model

    As for the strike, swaption vols are quoted ATM. So the strike for each of these is the forward par swap rate at the option expiry date for the tenor specified on the contract. BB also offers "vol cube" data--Black implied vols for options at a selection of expiries, tenors, and strikes, but...
  190. bob

    hardest question I got in an interview!

    Actually, on third or fourth thought, this isn't as complicated as it looks. Suppose that your strategy, given X the biggest draw on any particular day, is to guess c* = r*X for some r* you decide is best. So the r.v. R is (R = \frac{C}{X}) ...and we'd like to have the distribution of R in...
  191. bob

    hardest question I got in an interview!

    So I'll sketch out my reasons why I don't think this has a pat answer. BTW, I was mistaken earlier in the expression I gave for finding the MLE. The expression I gave for the conditional probability is actually the CDF, not the PDF of that r.v. If the r.v. X is the max of the 5 numbers...
  192. bob

    hardest question I got in an interview!

    Unsure what the reasoning is here. I don't think that even guarantees a guess greater than the largest X, which it should certainly be. So that I won't be thought of as a mean person, I should let everyone know that my personal opinion on part 2 is that it doesn't have an answer as posed...
  193. bob

    hardest question I got in an interview!

    For part 1, yes. This isn't hard to see, since (P(X_{max} = x; c) = (\frac{x}{c})^5), and this clearly approaches its maximum--1--when x = c. The second part is the one that stumped me in about hour 7.5 of the interview....
  194. bob

    hardest question I got in an interview!

    The hardest one I've gotten in an interview was the second part of a 2-part question: part 1: 5 numbers are chosen at random from the uniform distribution on (0, c) for some unknown positive c. Given the 5 numbers, what is the maximum likelihood estimator of c? part 2: A lottery is conducted...
  195. bob

    FYI: new CDS conventions in North America

    The attached is a doc from markit concerning the changes to the CDS market globally. The biggest one I see is that single-name in North America is going to start trading the way indices currently do: with one of two standard premium rates (100 or 500) and the rest settled upfront.
  196. bob

    discussion: FX swap --pricing/hedging

    Yeah, why not just post the confirm? Be sure to leave all the names in.
  197. bob

    hedging a interest rate rise

    The most convenient IR derivatives are only available OTC--swaps, caps/floors, and swaptions. CME trades a large number of IR-related futures contracts. Eurodollar and Fed Funds are the best known (and undoubtedly the most liquid), but they trade others. You might be able to cobble some sort...
  198. bob

    Lehman Merrill Lynch AIG Fannie Freddie WaMu Madoff Citibank saga

    I hope they don't nationalize Citi. The UK has already started using Northern Rock as an instrument of policy. Can you imagine the US Congress with a bank like Citi in its hands? In other news, I fear that GM may be well and truly dead. The only question is when the administration will decide...
  199. bob

    Senate approves restriction on foreign hires by banks receiving bailout

    After a meeting with one of our Russian developers, just before sending some specs off to one of our Chinese developers, having lately scanned an email from our Indian head of development, while waiting for our lead developer to come online in New Zealand, I thought I'd add my own opinion to the...