Tag Archives | trading
risk_intuition

Test Your Risk Intuition

March 28, 2011

I am dusting off a classic test for risk intuition. If you remember the test from years past, it will be nice to reminisce. If not, take the test now to assess your intuition and look at risk in a new way.

radioactive_warning

Stress Testing: A Reminder from Fukushima

March 17, 2011

The eyes of the world are on Fukushima, Japan, where heroic technicians and military personnel struggle to prevent a nuclear armageddon. A massive earthquake spawned a devastating tsunami that knocked out a nuclear power plant’s cooling system. And here we are. This reminds us how low-probability high-impact events tend to be correlated. If a country experiences prolonged draught, [...]

exhibit_12_10_2007

Benford’s Law

December 10, 2007

Benford’s Law is a fascinating theorem from statistics that states, for most forms of data, the leading digits of numbers are not uniformly distributed among 1 through 9. Instead, any given data point has a 30.1% probability of having a 1 as its leading digit. There is a 17.6% probability of the leading digit being [...]

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Market Makers’ Dilemma

October 11, 2007

One of my clients deals in a specialty commodity. They source the commodity, process it, and then sell it in local markets around the world. In some local markets, my client is a two-bit player. In others, they are the market maker. In those markets, they largely set the price of that commodity. Unlike a [...]

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Hedge Funds: Who’ll Take the Toxic Waste?

August 10, 2007

Long before Mark Twain stood on Wall Street and saw it was a “street with a river at one end and a graveyard at the other,” there has been financial manipulation and scams. During the Punic Wars against Carthage, businessmen offered to ship supplies to Rome’s army on condition the state insured their ships and [...]

book_bookstaber_richard_(2007)

Book Review: Demon of Our Own Design

June 2, 2007

Richard Bookstaber knows his way around Wall Street. Thirty years ago, he transitioned from academia to practice. He has worked in trading and risk management since. Along the way, he wrote one of the best introductions to options trading ever published. In this new book, he takes on multiple tasks. First and foremost, he offers [...]

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I’ll Be Gone. You’ll Be Gone.

January 19, 2007

In his new book Accidental Investment Banker, Jonathan Knee introduces us to the phrase IBG YBG, which means “I’ll be gone. You’ll be gone.” This might be whispered between investment bankers when an inconvenient fact comes to light during due diligence on a company they are about to float. “Don’t sweat it” is the implication. [...]

book_boberski_david_(2006)

Book Review: Valuing Fixed Income Futures

December 22, 2006

This book’s title is wrong. It is not a book about valuing fixed income futures. It is a book for traders—and a wonderful book at that. It targets experienced traders who are familiar with concepts such as Libor or repo but may be new to trading fixed income futures. Anyone entering these markets for the [...]