Financial Mathematics

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Tag archives for Financial Mathematics

Iceland tells them to shove it

Icelanders reject deal to repay British and Dutch: The outcome of the referendum had not been in doubt since Iceland had recently been offered better repayment terms than those contained in the deal on which residents were voting. Partial referendum results from around a third of the cast votes showed 93 percent opposed the deal…

For the greater good

The Price of Casino-Like Finance Is Higher Than We Think: However, Maxine suspects that the longest term and most severe damage from the finance casino will not be from government deficits required to shore up too-big-to-fail banks and insurers. It will be from two powerful, long-standing price distortions that have distorted the composition of our…

The efficient market vs. its enemies

I’m reading Justin Fox’s The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street, which is on many “To Read” lists because of its topical relevance. I think it is especially illuminating when examined in light of another work, Toward Rational Exuberance: The Evolution of the Modern Stock Market…

The modifier on innovation

Felix Salmon has been at the center of a discussion on the merits and value-add of financial innovation. He notes: Then there’s the more purely financial innovation. There are good things here too — fractional reserve banking, factoring, common-stock limited-liability companies, tradable fungible bonds, stock-market index funds, that sort of thing. But on this front…

Finance vs. physics

Interesting Q & A on the “shadow banking” system over at The Atlantic. The last answer is illustrative of a major distinction between physical and social systems: I use the term “Credit Insurer of Last Resort.” And here’s the idea: The Bagehot Rule – lend freely, at a high rate, in a crisis – dates…

On Financial Foolishness

Check out this Felix Salmon’s interview (video) with Gillian Tett, author of Fool’s Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe (the reference to “Tribe” is a wink to Tett’s background as an anthropologist). Also, she was recently on NPR.

Needed for AIG and the TARP: Silicon Valley Compensation Schemes: The engineers of Silicon Valley startups are significantly smarter and work a lot harder than do the traders of Wall Street. Some of the engineers of Silicon Valley make fortunes: they are compensated with relatively low salaries and large restricted equity stakes in the startup…

Shoot the bankers in the knees?

How bank bonuses let us all down: …Because banking is not about true risks but perceived volatility of returns: you earn a stream of steady bonuses for seven or eight years, then when the losses take place, you are not asked to disburse anything. You might even start again, after blaming a “systemic crisis” or…

The function that f**ked the world?

Recipe for Disaster: The Formula That Killed Wall Street: In hindsight, ignoring those warnings looks foolhardy. But at the time, it was easy. Banks dismissed them, partly because the managers empowered to apply the brakes didn’t understand the arguments between various arms of the quant universe. Besides, they were making too much money to stop.…