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Finance Clippings wrote a new blog post titled Why 8.5% is delusional
I am quoted today in an article on Bloomberg.com about the Connecticut pension fund return assumptions.  The article is here:  https://www.bloomberg.com/news/articles/2017-07-20/connecticut-sinks-deeper-in-debt-as-pension-returns-lag-target So why is an 8.5% return assumption delusional? It's pretty simply really.  Assume that your fund is 50% bonds, 50% stocks.  Currently 10-year Treasuries are yielding about 2.3%.  Let's round that up to say 3% to be generous....
9 minutes ago
The Practical Quant wrote a new blog post titled How big data and AI will reshape the automotive industry
[A version of this post appears on the O'Reilly Radar.]The O’Reilly Data Show Podcast: Evangelos Simoudis on next-generation mobility services.Subscribe to the O’Reilly Data Show Podcast to explore the opportunities and techniques driving big data, data science, and AI. Find us on Stitcher, TuneIn, iTunes, SoundCloud, RSS.In this episode of the Data Show, I spoke with Evangelos Simoudis, co-founder of Synapse Partners and a frequent contributor to O’Reilly. He recently published a book entitled The Big Data Opportunity in Our Driverless Future, and I wanted get his thoughts on the...
3 hours ago
Musings on Markets wrote a new blog post titled Online Teaching: Promise, Pitfalls and Potential!
I am a teacher. That is how I describe myself to anyone who chooses to ask me what I do for a living. I am not a professor (sounds pedantic and pompous), definitely not an academic (how boring is that..) and don't consider myself anything more than a dilettante on almost every topic that I hold forth on. It is in pursuit of my teaching mission that I have put my regular classes online for most of the last two decades, though technology has made that sharing easier. For those of you who have...
5 hours ago
The Reformed Broker wrote a new blog post titled Hot Links: Enter the Twilight
What I'm reading this morning ...
6 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Measuring the Knowledge Intensity of Economies with an Improved Measure of Economic Complexity. (arXiv:1707.05826v1 [q-fin.EC])
How much knowledge is there in an economy? In recent years, data on the mix of products that countries export has been used to construct measures of economic complexity that estimate the knowledge available in an economy and predict future economic growth. Here we introduce a new metric of economic complexity (ECI+) that measures the total exports of an economy corrected by how difficult it is to export each product. We use data from 1973 to 2013 to compare the ability of ECI+, the Economic Complexity Index (ECI), and Fitness complexity, to predict future economic growth using 5, 10, and...
18 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Contagious disruptions and complexity traps in economic development. (arXiv:1707.05914v1 [q-fin.GN])
Poor economies not only produce less; they typically produce things that involve fewer inputs and fewer intermediate steps. Yet the supply chains of poor countries face more frequent disruptions---delivery failures, faulty parts, delays, power outages, theft, government failures---that systematically thwart the production process. To understand how these disruptions affect economic development, we model an evolving input--output network in which disruptions spread contagiously among optimizing agents. The key finding is that a poverty trap can emerge: agents adapt to frequent disruptions...
18 hours ago
Quantitative Finance at arXiv wrote a new blog post titled American Options with Discontinuous Two-Level Caps. (arXiv:1707.06138v1 [q-fin.PR])
This paper examines the valuation of American capped call options with two-level caps. The structure of the immediate exercise region is significantly more complex than in the classical case with constant cap. When the cap grows over time, making extensive use of probabilistic arguments and local time, we show that the exercise region can be the union of two disconnected set. Alternatively, it can consist of two sets connected by a line. The problem then reduces to the characterization of the upper boundary of the first set, which is shown to satisfy a recursive integral equation. When the...
18 hours ago
The Reformed Broker wrote a new blog post titled Brokers Go Bye Bye
A growing number of brokers, disillusioned with pay hurdles and strict corporate cultures...
The Reformed Broker wrote a new blog post titled Barking Up The Wrong Tree: My Reaction
I learned so much in the week it took me to read the third selection for my Seven Books plan. ...
The Reformed Broker wrote a new blog post titled Hot Links: Kodak Banks
What I'm reading this morning ...
The Monetary Future wrote a new blog post titled Bitcoin Foundation’s Chief Jon Matonis to Resign
By Michael Casey Wall Street Journal Thursday, October 30, 2014 http://www.wsj.com/articles/bitcoin-foundations-chief-jon-matonis-to-resign-1414691244 Jon Matonis is resigning as executive director of the Bitcoin Foundation, a trade group that supports and advocates for the development and expansion of bitcoin, the digital currency. Effective Friday, Mr. Matonis will be replaced by Patrick Murck, who has been the foundation’s general counsel. Messrs. Matonis and Murck, both founding members, played key roles containing the fallout surrounding bitcoin during some harmful scandals......
Quantitative Finance at arXiv wrote a new blog post titled Second order stochastic differential models for financial markets. (arXiv:1707.05419v1 [q-fin.MF])
Using agent-based modelling, empirical evidence and physical ideas, such as the energy function and the fact that the phase space must have twice the dimension of the configuration space, we argue that the stochastic differential equations which describe the motion of financial prices with respect to real world probability measures should be of second order (and non-Markovian), instead of first order models \`a la Bachelier--Samuelson. Our theoretical result in stochastic dynamical systems shows that one cannot correctly reduce second order models to first order models by simply forgetting...
2 days ago