May
12
An excellent PDF document listing the financial credit crisis timeline by the University of IOWA centre for international finance & development. It includes fairly detailed events happened from 2006 to 2009, enjoy it (I posted on my twitter first, so add @a_biao & chat with me if you like :) ).
http://www.uiowa.edu/ifdebook/timeline/Financial_Crisis_Timeline.pdf
http://www.uiowa.edu/ifdebook/timeline/Financial_Crisis_Timeline.pdf
May
9
This article is a book review for “Inside the Black Box: The Simple Truth About Quantitative Trading”, which is published by Wiley Finance, and written by Rishi K. Narang.
This is an exceptional book for new comers to the quantitative trading, because it is very easy to read and understand. It allows you to pick up the information required to start trading, and much more importantly, making money doing it using the methods instructed in this book.
There is one word of warning though, which is you need to think like a mathematician to utilize its techniques to the fullest. While the math skills needed to implement what is taught in the book, are not at too high of a level, evaluating the data requires a more systematic approach than most beginners possess when they are first starting out in this field.
It is therefore recommended, that if you do decide to uses the systems you learn in this book, you take your time, and do not invest actual funds, until you practice extensively your back end assessing abilities.
This is an exceptional book for new comers to the quantitative trading, because it is very easy to read and understand. It allows you to pick up the information required to start trading, and much more importantly, making money doing it using the methods instructed in this book.
There is one word of warning though, which is you need to think like a mathematician to utilize its techniques to the fullest. While the math skills needed to implement what is taught in the book, are not at too high of a level, evaluating the data requires a more systematic approach than most beginners possess when they are first starting out in this field. It is therefore recommended, that if you do decide to uses the systems you learn in this book, you take your time, and do not invest actual funds, until you practice extensively your back end assessing abilities.
May
6
China is now the second largest economy in the world, trailing only the United States. Over the past few years they have seen a noticeable increase in inflation that is threatening their status as a low cost production hub. Most, if not all of the world’s highest regarded economist believe that they are considerably under reporting their actual inflation figures, which makes this dilemma even more perplexing.
China has experienced many reported and unreported riots over the cost of food, which is increasing at an alarming rate. The government is working very hard at lowering food cost, and keeping inflation at a manageable rate. However, many experts in this field think they are fighting an uphill battle, if not a losing one all together.
If the government is not able to get this under control very soon, this could be quite bad news for Wall Street. Quite a few of the world’s largest manufactures, like General Electric, Ford, Toyota, General Motors, and Nissan have invested billions upon billions of dollars in China, because of their low cost manufacturing capacity.
China has experienced many reported and unreported riots over the cost of food, which is increasing at an alarming rate. The government is working very hard at lowering food cost, and keeping inflation at a manageable rate. However, many experts in this field think they are fighting an uphill battle, if not a losing one all together. If the government is not able to get this under control very soon, this could be quite bad news for Wall Street. Quite a few of the world’s largest manufactures, like General Electric, Ford, Toyota, General Motors, and Nissan have invested billions upon billions of dollars in China, because of their low cost manufacturing capacity.
May
5
The book Intermarket Technical Analysis: Trading Strategies for the Global Stock, Bond, Commodity, and Currency Markets is published by Wiley Finance, and authored by John Murphy. There is very little information on this subject, so for the investor that is interested in learning more about it; this book has proven to be a significant development.
This book is for the highly sophisticated and enduring investor. It is extremely detailed, as well as complicated, making it difficult reading for anybody that is not truly interested in learning more about intermarket analysis.
In it you will be taught why understanding the relationship between various countries economies is so important, and the rolls these associations play in the financial markets. You will come to appreciate why these connections are the solution to decoding both the intermediate and the long term trends that play out overtime.
You will learn about the four major market subdivisions based on the theory of a business cycle, and how the economy has gone through boom and bust periods over the past centuries. He will then teach you how to incorporate that knowledge with other economic factors to determine what stage the business cycle is presently in, and how this affects the overall economy.
This book is for the highly sophisticated and enduring investor. It is extremely detailed, as well as complicated, making it difficult reading for anybody that is not truly interested in learning more about intermarket analysis.
In it you will be taught why understanding the relationship between various countries economies is so important, and the rolls these associations play in the financial markets. You will come to appreciate why these connections are the solution to decoding both the intermediate and the long term trends that play out overtime.
You will learn about the four major market subdivisions based on the theory of a business cycle, and how the economy has gone through boom and bust periods over the past centuries. He will then teach you how to incorporate that knowledge with other economic factors to determine what stage the business cycle is presently in, and how this affects the overall economy.
May
3
Read an interesting paper last week "On the Number of State Variables in Options Pricing" by Gang Li, Chu Zhang. As the title suggests, this paper is trying to identify how many state variables are good enough to price an option, ideally the less variables the better.
The authors first review a few popular models for option pricing such as Black Scholes model, GARCH option pricing, and Stochastic volatility models, then they argue two possible sources of model misspecification, one is the omitted state variables, or factors, for instance, should we consider volatility smile? should we include jump into our pricing equation, etc. The other source of model misspecification is the functional form of the process for the state variables, including the specification of risk premiums associated with the state variables, this misspecification may be especially prone to error, or in another term, easily leads to model risk. Square root process or simple mean-reversion? or a combination of these two as some literature suggest.
In order to identify the necessary number of factors, the authors then use a nonparametric approach with state variables approximated by nonlinear principal components extracted from the implied volatilities. Nonparametric approach helps to overcome the problem of function form misspecification, and nonlinear principle component helps to demonstrate the explanatory power of each factor, similar with a typical principle component analysis except the former is able to capture the nonlinear relationship among observation series, which is obviously the case for the implied volatilities.
The authors first review a few popular models for option pricing such as Black Scholes model, GARCH option pricing, and Stochastic volatility models, then they argue two possible sources of model misspecification, one is the omitted state variables, or factors, for instance, should we consider volatility smile? should we include jump into our pricing equation, etc. The other source of model misspecification is the functional form of the process for the state variables, including the specification of risk premiums associated with the state variables, this misspecification may be especially prone to error, or in another term, easily leads to model risk. Square root process or simple mean-reversion? or a combination of these two as some literature suggest.
In order to identify the necessary number of factors, the authors then use a nonparametric approach with state variables approximated by nonlinear principal components extracted from the implied volatilities. Nonparametric approach helps to overcome the problem of function form misspecification, and nonlinear principle component helps to demonstrate the explanatory power of each factor, similar with a typical principle component analysis except the former is able to capture the nonlinear relationship among observation series, which is obviously the case for the implied volatilities.
