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Jan 16
It is difficult to survive in a complicated business world without sound knowledge on economics, management, law, the ways of doing business, etc. Some top business school teaches its MBA students the knowledge, but not everyone is (indeed, only a few are) fortunate enough to enter Harvard, Stanford, or Wharton. Below is a list of top 20 movies that a business man needs to watch, some of them are even highly recommended by those business school professors. You will have a better understanding of the principles and rules of how the business world runs, it will help your career as well.

Disclaimer: the videos are embedded from Youtube uploaded by others, some are full version and others are Trailer. Please consider to buy the movies from Amazon.

1, Wall Street (1987)


wall street
A young and impatient stockbroker is willing to do anything to get to the top, including trading on illegal inside information taken through a ruthless and greedy corporate raider who takes the youth under his wing.

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Jan 9
Online option calculator was shared several time before, for example, the post online derivative calculator, On-Line Options Pricing & Probability Calculators, etc. Today I came across another very clean website: online Option Pricing Models.

As the website describes:
You can get the price (and the Greeks) of the available options by applying several methods:

- Black & Scholes model for european options and greeks calculation.
- Bjerksund & Stensland model for american options.
- Binomial model (Cox, Ross & Rubinstein, Jarrow-Rudd Risk Neutral, Tian) for american and european options.
- Shifted Lognormal model for european options.
- Partial Differential Equation (PDE) approach: Finite Difference (FD) and Radial Basis Function (RBF) methods for american and   european options.
- Monte-Carlo for digital option (Cash-or-Nothing) and european options and greeks estimation (FD and Malliavin).

Volatility models (SABR with calibration, Lognormal model, etc.) are also available.


I randomly tested the option calculators, they are working well, on top of that, the site is created by a French master student. So it is fine to give him credit with a separated post. Check it at http://pricing-option.com/Default.aspx.
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Dec 19
On each day there are approximately 80 papers to be presented in 20 sessions, which is really a lot and hard to have a detailed and useful discussion, I would say too many presentations are the weak side of this 24th Australasian Finance & Banking Conference. I selected several papers of the first day based on my interests:

Asymmetric Effects of the Financial Crisis: Collateral-Based Investment-Cash Flow Sensitivity Analysis: investment-cash flow sensitivity must be measured taking into account the value of a firm’s assets that can be used as collateral.

Explaining Momentum Strategies Using Intrinsic Price Fluctuations: This paper focuses on cross-sectional equity momentum patterns by modeling a stock’s price path as the interaction between a long-term growth component and a number of fluctuating price components that oscillate around the long-term trend at various distinct frequencies.

Adverse Information and Mutual Fund Runs: anticipation of adverse events can also trigger runs in mutual funds.

Liquidity and Price Discovery of Algorithmic Trading: An Intraday Analysis on the SPI Futures Contract:  the intra-day impact of algorithmic trading on the futures market to increase our understanding of algorithmic trading and its role in the price formation process.

A full list of the presented papers can be downloaded at Conference papers.
Dec 2
Happy last month of 2011. I will fly to Sydney to present a paper at the 24th Australasian Finance & Banking Conference on next Thursday, so we may not have a review next week. However, feel free to contact me @a_biao for sharing any useful post. This week's review is highly concentrated on R language.

R-code for the algorithm of Ait-Sahalia: the Closed-Form expansion for the transition densities of diffusions by Professor Yacine Aït-Sahalia facilitates the Maximum Likelihood Estimation, the related papers and Matlab package can be downloaded directly at his website at Ait-Sahalia, but in case you are a R user, this is what you need.

R Memory Issue: insights on R memory issue, most of us have met it more or less.

Regression via Gradient Descent in R: detailed simple example demonstrating how to run a regression via Gradient descent in R: principle and codes.

Amelia II: A Program for Missing Data: An excellent R package for multiple imputation of missing data. I had a post introducing its first version at missing data imputation.

The Art of R Programming: A Tour of Statistical Software Design: the book title tells it, you can't miss it as a R user.

R Cheat Sheets: still having trouble remembering the exact commands in R? here is an excellent collection of R cheet sheets.

How to interpret Johansens' test results: simple while detailed examples guiding you through the basic knowledge how to interpret Johansenss test results for cointegration analysis.

Improving Trend-Following Strategies With Counter-Trend Entries: minor adjustments to strategies that can both improve their backtest performance and also reduce the real costs of trading.
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Oct 9
We know least-squares Monte Carlo simulation to price an American option is time consuming because it involves optimal exercise decision on every step of a large number of simulation (in the least square case, to run a polynomial regression on cash flows and decide whether it is optimal to exercise or not). I once shared a simple Matlab file to illustrate the least squares Monte Carlo simulation. The situation becomes worse if we allow the presence of stochastic volatility and interest rate, typically my codes run quite a few minutes for 50,000 number of simulations.

In the paper "Fast Monte Carlo Valuation of American Options under Stochastic Volatility and Interest Rates" by Y. Hilpisch, the author demonstrates with Python script that the Least-Squares Monte Carlo (LSM) algorithm with control variates takes only less than one second to achieve satisfying accurateness. The overall statistics taken from the paper are as follows, AMAZING!
least squares monte carlo simulation

Download the paper and accompanying Python codes at http://www2.visixion.com/dok/Fast_MCS_SVSI.pdf
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