archive-com.com » COM » T » THULASIDAS.COM

Total: 429

Choose link from "Titles, links and description words view":

Or switch to "Titles and links view".
  • Rumour Mills - Unreal Blog
    to the grapevine instead This credibility gap that a typical management team suffers from can be addressed only though open and candid communication Therein lies the rub The management cannot always be as candid as they would like to be And they certainly cannot afford to be as candid as the employees would like them to be Lack of candour in an atmosphere of uncertainty breeds rumour Rumours as defined in psychology are hypotheses with widespread impact They abound when the management refuses to trust the employees with strategic information This lack of trust and information leaves them with no choice but to interpret the developments themselves In such interpretations lie the origins of office rumours Rumours are not to be confused with gossip While rumours are based on conjecture and are presented as future corporate wide eventualities gossip can be idle or with malicious intent directed at individuals And gossip is usually presented as fact In highly competitive settings gossip can inflict irreparable damage on unsuspecting victims Once a rumour attains a high level of credibility the top brass will be forced to talk But the talk has to be candid and serious And it has to be timely If they wait for too long their attempts at a tête à tête would resemble feeble attempts at damage control And if the talk is a mere torrent of clichàs and rhetoric it will be taken as an effort to gloss over potentially catastrophic changes In fact such weak communication fuels more rumour than it quells Given that critical job related information usually flows down the grapevine the employees are going to talk The only sure fire strategy for any management is to make use of the underground rumour mill the classic if you can t beat em join

    Original URL path: http://www.thulasidas.com/rumour-mills/ (2016-02-16)
    Open archived version from archive

  • Stress and a Sense of Proportion - Unreal Blog
    thoughts and cares worries and stresses To each of them the only real stress is their own Once we know that why would we hold our own stress any more important than anybody else s The appreciation of the sheer number of personal stresses all around us if we stop to think about it will put our worries in perspective Proportion in terms of our size also is something to ponder over We occupy a tiny fraction of a large building that is our workplace Statistically speaking the reader of this column is not likely to occupy a large corner office The building occupies a tiny fraction of the space that is our beloved city All cities are so tiny that a dot on the world map is usually an overstatement of their size Our world the earth is a mere speck of dust a few miles from a fireball if we think of the sun as a fireball of any conceivable size The sun and its solar system are so tiny that if you were to put the picture of our galaxy as the wallpaper on your PC they would be sharing a pixel with a few thousand local stars And our galaxy don t get me started on that We have countless billions of them Our existence with all our worries and stresses is almost inconceivably small The insignificance of our existence is not limited to space it extends to time as well Time is tricky when it comes to a sense of proportion Let s think of the universe as 45 years old How long do you think our existence is in that scale A few seconds We are created out of star dust last for a mere cosmological instant and then turn back into star dust DNA machines during this time we run unknown genetic algorithms which we mistake for our aspirations and achievements or stresses and frustrations Relax Don t worry be happy Sure you may get reprimanded if that report doesn t go out tomorrow Or your supplier may get upset that your payment is delayed again Or your colleague may send out that backstabbing email and Bcc your boss if you displease them But don t you see in this mind numbingly humongous universe it doesn t matter an iota In the big scheme of things your stress is not even static noise Arguments for maintaining a level of stress all hinge on an ill conceived notion that stress aids productivity It does not The key to productivity is an attitude of joy at work When you stop worrying about reprimands and backstabs and accolades and start enjoying what you do productivity just happens I know it sounds a bit idealistic but my most productive pieces of work happened that way Enjoying what I do is an ideal I will shoot for any day Share this Click to share on Reddit Opens in new window Click to share on Voat Opens in new

    Original URL path: http://www.thulasidas.com/stress-and-a-sense-of-proportion/ (2016-02-16)
    Open archived version from archive

  • Money - Love it or Hate it - Unreal Blog
    for others and stay legal if not moral then you will make yourself very rich We see it most directly in the finance and investment industry but it is much more widespread than that We can see that even education traditionally considered a higher pursuit is indeed an investment against future earnings Viewed in that light you will understand the correlation between the tuition fees at various schools and the salaries their graduates command When I started writing this column I thought I was making up this new field called the Philosophy of Money which hopefully somebody would name after me but then I read up something on the philosophy of mind by John Searle It turned out that there was nothing patentable in this idea nor any cash to be made sadly Money comes under the umbrella of objective social realities that are quite unreal In his exposition of the construction of social reality Searle points out that when they give us a piece of paper and say that it is legal tender they are actually constructing money by that statement It is not a statement about its attribute or characteristics like This is a glass of water so much as a statement of intentionality that makes something what it is like You are my hero The difference between my being a hero perhaps only to my six year old and money being money is that the latter is socially accepted and it is as objective a reality as any I conclude this article with the nagging suspicion that I may not have argued my point well enough I started it with the premise that money is an unreal meta thing and wound up asserting its objective reality This ambivalence of mine may be a reflection of our collective

    Original URL path: http://www.thulasidas.com/philosophy-of-money-iv/ (2016-02-16)
    Open archived version from archive

  • Corporate Life Archives - Unreal Blog
    the same two companies She called again and the reply was Oh yeah of course Sorry it was an oversight If it was just one company it might have been an oversight Is it again part of the corporate policy to discourage policy payouts if at all possible Uninsured until proven otherwise If you have had similar experiences with insurance companies why not leave your story as a comment below Corporate Life fraud insurance parenting Books Corporate Life Quantitative Finance Where to Go from Here September 21 2013 manoj We started this long series with a pitch for my book Principles of Quantitative Development This series and the associated eBook is an expanded version of the non technical introductory chapters of the book what are the things we need to keep in mind while designing a trading platform Why is it important to know the big picture of finance and banking Hopefully these posts have given you a taste of it here If you would keep a copy of the series handy you can purchase and download the beautifully crafted eBook version We went through the structure of the bank from the exotic and structured trading perspective We talked about the various offices Front Office Middle Office and Back Office and pointed out the career opportunities for quantitative professionals within The organizational structure of the bank is the apparatus that processes the dynamic lifecycle of trades If the structure of the bank is akin to the spatial organization the lifecycle of the trade is the temporal variation their relation is like that of the rails and the trains We spent quite a bit of time on the flow of the trades between the front office and middle office teams how the trades get approved processed monitored settled and managed Each of these teams has their own perspective or work paradigm that helps them carry out their tasks efficiently Trade Perspectives was the last major topic we touched upon As we saw these perspectives are based on the way the various teams of the bank perform their tasks They form the backdrop of the jargon and are important if we are to develop a big picture understanding of the way a bank works Most quants especially at junior levels despise the big picture They think of it as a distraction from their real work of marrying stochastic calculus to C But to a trader the best model in the world is worthless unless it can be deployed When we change our narrow albeit effective focus on the work at hand to an understanding of our role and value in the organization we will see the possible points of failure of the systems and processes as well as the opportunities to make a difference We will then be better placed to take our careers to its full potential computing Corporate Life money quantitative finance wilmott Books Corporate Life Quantitative Finance Other Trade Perspectives September 15 2013 manoj In the previous posts we saw how various teams view the trading activity in their own work paradigm The perspective that is most common in the bank is still trade centric In this view trades form the primary objects which is why all conventional trading systems keep track of them Put bunch of trades together you get a portfolio Put a few portfolios together you have a book The whole Global Markets is merely a collection of books This paradigm has worked well and is probably the best compromise between different possible views The trade centric perspective however is only a compromise The activities of the trading floor can be viewed from different angles Each perspective has its role in how the bank works From the viewpoint of traders the trading activity looks asset class centric Typically associated with a particular trading desks based on asset classes their favorite view cuts across models and products To traders all products and models are merely tools to make profit IT department views the trading world from a completely different perspective Theirs is a system centric view where the same product using the same model appearing in two different systems is basically two completely different beasts This view is not particularly appreciated by traders quants or quant developers One view that the whole bank appreciates is the view of the senior management which is narrowly focussed on the bottom line The big bosses can prioritise things whether products asset classes or systems in terms of the money they bring to the shareholders Models and trades are typically not visible from their view from the top unless of course rogue traders lose a lot of money on a particular product or by using a particular model When the trade reaches the Market Risk Management there is a subtle change in the perspective from a trade level view to a portfolio or book level view Though mathematically trivial after all the difference is only a matter of aggregation this change has implications in the system design The trading platform has to maintain a robust hierarchical portfolio structure so that various dicing and slicing as required in the later stages of the trade lifecycle can be handled with natural ease When it comes to Finance and their notions of cost centers the trade is pretty much out of the booking system Still they manage trading desks and asset classes cost centers Any trading platform we design has to provide adequate hooks in the system to respond to their specific requirements as well Closely related to this view is the perspective of Human Resources who decide incentives based on performance measured in terms of the bottom lines at cost center or team levels computing Corporate Life money quantitative finance wilmott Books Corporate Life Quantitative Finance Middle Office September 9 2013 manoj The perspective employed by the Middle Office team is an interesting one Their work paradigm is that of queues running in a first in first out mode As shown in the

    Original URL path: http://www.thulasidas.com/tag/corporate-life/ (2016-02-16)
    Open archived version from archive

  • Money - Why do We Crave it? - Unreal Blog
    of thinking We can easily make it a negative thing by portraying the demand for the investment value of money as greed It then follows that all of us are greedy and that it is our greed that fuels the insane compensation packages of top level executives Greed also fuels fraud ponzi and pyramid schemes Indeed any kind of strong feeling that you have can be bought and sold for personal gain of others It may be your genuine sympathy for the Tsunami or earthquake victims your voyeuristic disgust at the peccadilloes of golf icons or presidents charitable feeling toward kidney patients of whatever And the way money is made out of your feelings may not be obvious at all Watching the news five minutes longer than usual because of a natural disaster may bring extra fortune to the network s coffers But of all the human frailties one can make money out of the easiest is greed I think Well I may be wrong it may actually be that frailty that engendered the oldest profession But I would think that the profession based on the lucrative frailty of greed wasn t all that far behind If we want to exploit other people s greed the first thing to ask ourselves is this why do we want money given that it is a meta entity I know we all need money to live But I am not talking about the need part Assuming the need part is taken care of we still want more of it Why Say you are a billionaire Why would you want another billion I think the answer lies in something philosophical something of an existential angst although those with their billions would the last ones to admit it The reason behind this deep rooted need

    Original URL path: http://www.thulasidas.com/philosophy-of-money-iii/ (2016-02-16)
    Open archived version from archive

  • The Ultra Rich - Unreal Blog
    Working for yourself if you are very lucky and extremely talented you may make a bundle When we hear the word rich the people that come to mind tend to be entrepreneurs industrialists software moguls like Bill Gates Richard Branson etc celebrities actors writers etc investment professionals Warren Buffet for instance and fraudsters of the Madoff school There is a common thread that runs across all these categories of rich people and the endeavors that make them their money It is the notion of scalability To understand it well let s look at why there is a limit to how much money you can make as a professional Let s say you are a very successful highly skilled professional say a brain surgeon You charge 10k a surgery of which you perform one a day So you make about 2 5 million a year Serious money no doubt How do you scale it up though By working twice as long and charging more may be you can make 5 million or 10 million But there is a limit you won t be able to go beyond The limit comes about because the fundamental economic transaction involves selling your time Although your time may be highly skilled and expensive you have only 24 hours of it in a day to sell That is your limit Now take the example of say John Grisham He spends his time researching and writing his best selling books In that sense he sells his time as well But the big difference is that he sells it to many people And the number of people he sells his product to may have an exponential dependence on its quality and therefore the time he spends on it We can see a similar pattern in software products like Windows XP performances by artists sports events movies and so on One performance or accomplishment is sold countless times With a slight stretch of imagination we can say that entrepreneurs are also selling their time that they spend setting up their businesses multiple times to customers clients passengers etc All these money spinners work hard to develop some kind of exponential volume dependence on the quality of their products or the time they spend on them This is the only way to address the scalability issue that comes about due to the paucity of time Investment professionals bankers do it too They develop new products and ideas that they can sell to the masses In addition they make use of a different aspect of money that we touched upon in an earlier column You see money has a transactional value It plays the role of a medium facilitating economic exchanges In financial transactions however money becomes the entity that is being transacted Financial systems essentially move money from savings and transforms it into capital Thus money takes on an investment value in addition to its intrinsic transactional value This investment value is the basis of interest Share this Click to

    Original URL path: http://www.thulasidas.com/philosophy-of-money-ii/ (2016-02-16)
    Open archived version from archive

  • The Wilmott Magazine Archives - Page 4 of 4 - Unreal Blog
    Committee on Homeland Security and Governmental Affairs May 20 2008 http hsgac senate gov public files 052008Masters pdf 4 Cushing OK WTI Spot Price FOB Dollars per Barrel Data source Energy Information Administration http tonto eia doe gov dnav pet hist rwtcd htm 5 I define the WTI volatility on a particular day as the standard deviation of the spot price returns over 31 days around that day annualized by the appropriate factor Using standard notations the volatility on a day t is defined as 6 Given that the correlation between EUR USD and WTI Spot is positive in 2007 and 2008 the volatility when measured in Euro is expected to be smaller than the volatility in Dollar The expected difference is tiny about 0 3 absolute because the EUR USD volatility defined as in 5 is about 2 The reason for the counter intuitive finding in Figure 4 is probably in my definition of the volatility as in 5 7 Monwhea Jeng A selected history of expectation bias in physics American Journal of Physics July 2006 Volume 74 Issue 7 pp 578 583 http arxiv org pdf physics 0508199 Box Biased Opinions As an ex experimental physicist I am well aware of the effect of bias Once you have a favoured view you can never be free of bias It is not that you actively misrepresent the data to push your view But you tend to critically analyze the data points that do not match your view and tend to be lenient on the ones that do For instance suppose I do an experiment to measure a quantity that Richard Feynman predicted to be say 1 37 I repeat the experiment three times and get values 1 34 1 30 and 1 21 The right thing to do is to report a measurement of 1 29 with an error of 0 06 But knowing the Feynman prediction and more importantly knowing who Feynman is I would take a hard look at the 1 21 trial If I find anything wrong with it which I will because no experiment is perfect I might repeat it and possibly get a number closer to 1 37 It is biases of this kind that physicists try very hard to avoid See 7 for an interesting study on biases in physics In this column I do have a favoured view that the main driver of the commodity price inflation is speculation In order to avoid pushing my view and shaping my readers opinion I state clearly that there is a potential of bias in this column The view that I have chosen to favour has no special reason for being right It is just one of the many hands popular among economists About the Author The author is a scientist from the European Organization for Nuclear Research CERN who currently works as a senior quantitative developer at Standard Chartered in Singapore The views expressed in this column are only his personal views which have not been influenced by considerations of the firm s business or client relationships More information about the author can be found at his web site http www Thulasidas com bio fuel commodity prices crude oil prices demand and supply food prices michael masters price surge wilmott Columns Quantitative Finance The Wilmott Magazine Software Nightmares July 28 2008 manoj To err is human but to really foul things up you need a computer So states the remarkably insightful Murphy s Law And nowhere else does this ring truer than in our financial workplace After all it is the financial sector that drove the rapid progress in the computing industry which is why the first computing giant had the word business in its name The financial industry keeps up with the developments in the computer industry for one simple reason Stronger computers and smarter programs mean more money a concept we readily grasp As we use the latest and greatest in computer technology and pour money into it we fuel further developments in the computing field In other words not only did we start the fire we actively fan it as well But it is not a bad fire the positive feedback loop that we helped set up has served both the industries well This inter dependency healthy as it is gives us nightmarish visions of perfect storms and dire consequences Computers being the perfect tools for completely fouling things up our troubling nightmares are more justified than we care to admit Models vs Systems Paraphrasing a deadly argument that some gun aficionados make I will defend our addiction to information technology Computers don t foul things up people do Mind you I am not implying that we always mess it up when we deploy computers But at times we try to massage our existing processes into their computerised counterparts creating multiple points of failure The right approach instead is often to redesign the processes so that they can take advantage of the technology But it is easier said than done To see why we have to look beyond systems and processes and focus on the human factors In a financial institution we are in the business of making money We fine tune our reward structure in such a way that our core business of making money that is runs as smoothly as possible Smooth operation relies on strict adherence to processes and the underlying policies they implement In this rigid structure there is little room for visionary innovation This structural lack of incentive to innovate results in staff hurrying through a new system rollout or a process re engineering They have neither the luxury of time nor the freedom to slack off in the dreaded business as usual to do a thorough job of such non essential things Besides there is seldom any unused human resource to deploy in studying and improving processes so that they can better exploit technology People who do it need to have multi facetted capabilities business and computing for instance Being costly they are much more optimally deployed in the core business of making more money Think about it when is the last time you or someone you know got hired to revamp a system and the associated processes The closest you get is when someone is hired to duplicate a system that is already known to work better elsewhere The lack of incentive results in a dearth of thought and care invested in the optimal use of technology Suboptimal systems which do one thing well at the cost of everything else abound in our workplace In time we will reach a point where we have to bite the bullet and redesign these systems When redesigning a system we have to think about all the processes involved And we have to think about the system while designing or redesigning processes This cyclic dependence is the theme of this article Systems do not figure in a quant s immediate concern What concerns us more is our strongest value add namely mathematical modelling In order to come up with an optimal deployment strategy for models however we need to pay attention to operational issues like trade workflow I was talking to one of our top traders the other day and he mentioned that a quant no matter how smart is useless unless his work can be deployed effectively and in a timely manner A quant typically delivers his work as a C program In a rapid deployment scenario his program will have to plug directly into a system that will manage trade booking risk measurements operations and settlement The need for rapid deployment makes it essential for the quants to understand the trade lifecycle and business operations Life of a Trade Once a quant figures out how to price a new product his work is basically done After coaxing that stochastic integral into a pricing formula failing which a Crank Nicholson or Monte Carlo the quant writes up a program and moves on to the next challenge It is when the trading desk picks up the pricing spreadsheet and books the first trade into the system that the fun begins Then the trade takes on a life of its own sneaking through various departments and systems showing different strokes to different folks This adventurous biography of the trade is depicted in Figure 1 in its simplified form At the inception stage a trade is conceptualized by the Front Office folks sales structuring trading desk shown in yellow ovals in the figure They study the market need and potential and assess the trade viability Once they see and grab a market opportunity a trade is born Even with the best of quant models a trade cannot be priced without market data such as prices volatilities rates and correlations and so on The validity of the market data is ensured by Product Control or Market Risk people The data management group also needs to work closely with Information Technology IT to ensure live data feeds The trade first goes for a counterparty credit control the pink bubbles The credit controllers ask questions like if we go ahead with the deal how much will the counterparty end up owing us Does the counterparty have enough credit left to engage in this deal Since the credit exposure changes during the life cycle of the trade this is a minor quant calculation on its own In principle the Front Office can do the deal only after the credit control approves of it Credit Risk folks use historical data internal and external credit rating systems and their own quantitative modelling team to come up with counterparty credit limits and maximum per trade and netted exposures Right after the trade is booked it goes through some control checks by the Middle Office These fine people verify the trade details validate the initial pricing apply some reasonable reserves against the insane profit claims of the Front Office and come up with a simple yea or nay to the trade as it is booked If they say yes the trade is considered validated and active If not the trade goes back to the desk for modifications After these inception activities trades go through their daily processing In addition to the daily or intra day hedge rebalancing in the Front Office the Market Risk Management folks mark their books to market They also take care of compliance reporting to regulatory bodies as well as risk reporting to the upper management a process that has far reaching consequences The Risk Management folks whose work is never done as Tracy Chapman would say also perform scenario stress test and historical Value at Risk VaR computations In stress tests they apply a drastic market movement of the kind that took place in the past like the Asian currency crisis or 9 11 to the current market data and estimate the movement in the bank s book In historical VaR they apply the market movements in the immediate past typically last year and figure out the 99 percentile or some such pre determined number worst loss scenario Such analysis is of enormous importance to the senior management and in regulatory and compliance reporting In Figure 1 the activities of the Risk Management folks are depicted in blue bubbles In their attempts to rein in the ebullient traders the Risk Management folks come across in their adversarial worst But we have to remind ourselves that the trading and control processes are designed that way It is the constant conflict between the risk takers Front Office and the risk controllers Risk Management that implements the risk appetite of the bank as decided by the upper management Another group that crunches the trade numbers every day from a slightly different perspective are the Product Control folks shown in green in Figure 1 They worry about the daily profit and loss P L movements both at trade and portfolio level They also modulate the profit claims by the Front Office through a reserving mechanism and come up with the so called unrealized P L This P L unrealized as it is has a direct impact on the compensation and incentive structure of Front Office in the short run Hence the perennial tussle over the reserve levels In the long term however the trade gets settled and the P L becomes realized and nobody argues over it Once the trade is in the maturity phase it is Finance that worries about statistics and cash flows Their big picture view ends up in annual reports and stake holders meetings and influences everything from our bonus to the CEO s new Gulfstream Trades are not static entities During the course of their life they evolve Their evolution is typically handled by Middle Office people grey bubbles who worry about trade modifications fixings knock ins knock outs etc The exact name given to this business unit and indeed other units described above depends on the financial institution we work in but the trade flow is roughly the same The trade flow that I described so far should ring alarm bells in a quant heart Where are the quants in this value chain Well they are hidden in a couple of places Some of them find home in the Market Risk Management validating pricing models Some others may live in Credit Risk estimating peak exposures figuring out rating schemes and minimising capital charges Most important of all they find their place before a trade is ever booked Quants teach their home banks how to price products A financial institution cannot warehouse the risk associated with a trade unless it knows how much the product in question is worth It is in this crucial sense that model quants drive the business In a financial marketplace that is increasingly hungry for customized structures and solutions the role of the quants has become almost unbearably vital Along with the need for innovative models comes the imperative of robust platforms to launch them in a timely fashion to capture transient market opportunities In our better investment banks such platforms are built in house This trend towards self reliance is not hard to understand If we use a generic trading platform from a vendor it may work well for established read vanilla products It may handle the established processes read compliance reporting settlements audit trails etc well But what do we do when we need a hitherto unknown structure priced We could ask the vendor to develop it But then they will take a long time to respond And when they finally do they will sell it to all our competitors or charge us an arm and a leg for exclusivity thereby eradicating any associated profit potential Once a vended solution is off the table we are left with the more exciting option of developing in house system It is when we design an in house system that we need to appreciate the big picture We will need to understand the whole trade flow through the different business units and processes as well as the associated trade perspectives Trade Perspectives The perspective that is most common these days is trade centric In this view trades are the primary objects which is why conventional trading systems keep track of them Put bunch of trades together you get a portfolio Put a few portfolios together you have a book The whole Global Markets is merely a collection of books This paradigm has worked well and is probably the best compromise between different possible views But the trade centric perspective is only a compromise The activities of the trading floor can be viewed from different angles Each view has its role in the bigger scheme of things in the bank Quants for instance are model centric They try to find commonality between various products in terms of the underlying mathematics If they can reuse their models from one product to another potentially across asset classes they minimize the effort required of them Remember how Merton views the whole world as options I listened to him in amazement once when he explained the Asian currency crisis as originating from the risk profile of compound options the bank guarantees to corporate clients being put options government guarantees to banks being put options on put options Unlike quants who develop pricing models quantitative developers tend to be product centric To them it doesn t matter too much even if two different products use very similar models They may still have to write separate code for them depending on the infrastructure market data conventions etc Traders see their world from the asset class angle Typically associated with a particular trading desks based on asset classes their favourite view cuts across models and products To traders all products and models are merely tools to making profit IT folks view the trading world from a completely different perspective Theirs is a system centric view where the same product using the same model appearing in two different systems is basically two different beasts This view is not particularly appreciated by traders quants or quant developers One view that all of us appreciate is the view of the senior management which is narrowly focussed on the bottom line The big bosses can prioritise things whether products asset classes or systems in terms of the money they bring to the shareholders Models and trades are typically not visible from their view unless of course rogue traders lose a lot of money on a particular product or by using a particular model Or somewhat less likely they make huge profits using the same tricks When the trade reaches the Market Risk folks there is a subtle change in the perspective from a trade level view to a portfolio or book level view Though mathematically trivial after all the difference is only a matter of aggregation this change has implications in the system design Trading systems have to maintain a robust hierarchical portfolio structure so that various dicing and slicing as required in the later stages of the trade lifecycle can be handled with natural ease The busy folks in the Middle Office who take care of trade validations and modifications are obsessed with trade queues They have a validation queue market operation queue etc Again the management of queues using status flags is something we have to keep in mind while designing an in house system When it comes to Finance and their notions of cost centres the trade is pretty much out of the booking system Still they manage trading desks and asset classes cost centres Any trading platform we design has to provide adequate hooks in the system to respond to their specific requirements as well Quants and the Big Picture Most quants especially at junior levels despise the Big Picture They think of it as a distraction from their real work of marrying stochastic calculus to C Changing that mindset to some degree is the hidden agenda behind this column As my trader friends will agree the best model in the world is worthless unless it can be deployed Deployment is the fast track to the big picture no point denying it Besides in an increasingly interconnected world where a crazy Frenchman s actions instantly affect our bonus what is the use of denying the existence of the big picture in our nook of the woods Instead let s take advantage of the big picture to empower ourselves Let s bite the bullet and sit through a Big Picture 101 When we change our narrow albeit effective focus on the work at hand to an understanding of our role and value in the organization we will see the potential points of failure of the systems and processes We will be prepared with possible solutions to the nightmarish havoc that computerized processes can wreak And we will sleep easier computing murphy s law quantitative finance software trading Columns Quantitative Finance The Wilmott Magazine Risks and Rewards May 1 2008 manoj Everything in life comes at a cost with a price tag seldom denominated in dollars and cents and almost always hidden In our profession as quants and traders we know we cannot accumulate if we don t speculate as P G Wodehouse puts it So we accept and even welcome some of these price tags We take certain risks which we hope are calculated and understood so that we can bring unto our employers what is theirs These are good risks Bad risks are those we cannot understand and quantify or measure and hedge against They are bad because even if we rake in some profits we are never sure that they are commensurate with the downside we are throwing ourselves open to Market risk is a good risk We know how to measure and model it hedge against and reap rewards from it We have smart people with bulging foreheads solving stochastic differential equations for us and simplifying the risk reward equation Operational risk is a bad one We can put as many software locks and control processes as we want around it But we cannot prevent the rogue elements amongst us from sharing their passwords over a beer in some French brasserie Worse we have no idea what the rewards are when we expose ourselves to certain levels of operational risk Heck we don t even know what the levels are because we have no means of quantifying it Incomplete appreciation of the risks involved in many situations is an almost philosophical factor that comes around to haunt us It is not that we underestimate the risks it is more like we are not aware of certain ramifications The inconvenient warming of our home planet for instance is a consequence that the Wright brothers and Henry Ford simply could not have been aware of No such thing as a free lunch the seemingly unlimited and practically free supply of nuclear energy has a not so hidden cost the necessity to dispose of or securely store dangerous waste for say twenty thousand years How do you store something for that long After all twenty thousand years ago we were only barely human But the list of such boons and associated banes is endless Think of the prosperity that a flattened world using Thomas Friedman s lingo brought to emerging economies like India and China which came at the expense of the cultural values that took thousands of years of careful nurturing A personal ramification of our high powered corporate life is the alarming level of stress that we put ourselves through Stress comes from market movements As the sub prime market tanked and heads started to roll some of us had to worry about our heads Fat bonuses of the first quarter usher in tax worries lean bonuses indicate uncertain corporate future Rogue traders burn billions and expose everybody to scrutiny and associated stresses Even the lack of stress brings in some worries that the corporate world is perhaps passing us by When I first switched to the finance industry in late 2005 I happened to flip through an issue of the Bloomberg Market magazine On of the first things struck me was that most of the advertisements seemed to be of expensive cars or alcohol Is alcoholism the cost we readily dish out so that we can afford a gleaming dream machine Is stress a price worth paying for our corporate success Are the risks worth their rewards Married to the Job Till Death Do Us Part Stress is as much a part of our corporate careers as death is a fact of life Still it is best to keep the two career and death separate This is the message that was lost on some hardworking young souls here in Singapore who literally worked themselves to death So do a lot of Japanese if we are to believe the media The reason for death in sedentary jobs is the insidious condition called deep vein thrombosis This condition develops because of extended hours spent sitting when a blood clot forms in the lower limbs The clot then travels to the vital organs in the upper body where it wreaks havoc including death The trick in avoiding such an untimely demise of course is not to sit for long But that is easier said than done when job pressure mounts and deadlines loom Here is where you have to get your priorities straight What do you value more Quality of life or corporate success The implication in this choice is that you can t have both as illustrated in the joke in investment banking that goes like If you can t come in on Saturday don t bother coming in on Sunday You can however make a compromise It is possible to let go a little bit of career aspirations and improve the quality of life tremendously This balancing act is not so simple though nothing in life is Undermining work life balance are a few factors One is the materialistic culture we live in It is hard to fight that trend Second is a misguided notion that you can make it first then sit back and enjoy life That point in time when you are free from worldly worries rarely materializes Thirdly you may have a career oriented partner Even when you are ready to take a balanced approach your partner may not be thereby diminishing the value of putting it in practice These are factors you have to constantly battle against And you can win the battle with logic discipline and determination However there is a fourth much more sinister factor which is the myth that a successful career is an all or nothing proposition as implied in the preceding investment banking joke It is a myth perhaps knowingly propagated by the bosses that hangs over our corporate heads like the sword of Damocles Because of this myth people end up working late trying to make an impression But an impression is made not by the quantity of work but by its quality Turn in quality impactful work and you will be rewarded regardless of how long it takes to accomplish it Long hours in my view make the possibility of quality work remote Such melancholy long hours are best left to workaholics they keep working because they cannot help it It is not so much a career aspiration but a force of habit coupled with a fear of social life To strike a work life balance in today s dog eat dog world you may have to sacrifice a few upper rungs of the proverbial corporate ladder Raging against the corporate machine with no regard to the consequences ultimately boils down to one simple realization that making a living amounts to nothing if your life is lost in the process Spousal Indifference Do We Give a Damn After a long day at work you want to rest your exhausted mind may be you want to gloat a bit about your little victories or whine a bit about your little setbacks of the day The ideal victim for this mental catharsis is your spouse But the spouse in today s double income families is also suffering from a tired mind at the end of the day The conversation between two tired minds usually lacks an essential ingredient the listener And a conversation without a listener is not much of a conversation at all It is merely two monologues that will end up generating one more setback to whine about spousal indifference Indifference is no small matter to scoff at It is the opposite of love if we are to believe Elie Weisel So we do have to guard against indifference if we want to have a shot at happiness for a loveless life is seldom a happy one Where got time ask we Singaporeans too busy to form a complete sentence Ah time At the heart of all our worldly worries We only have 24 hours of it in a day before tomorrow comes charging in obliterating all our noble intensions of the day And another cycle begins another inexorable revolution of the big wheel and the rat race goes on The trouble with the rat race is that at the end of it even if you win you are still a rat How do we break this vicious cycle We can start by listening rather than talking Listening is not as easy as it sounds We usually listen with a whole bunch of mental filters turned on constantly judging and processing everything we hear We label the incoming statements as important useful trivial pathetic etc And we store them away with appropriate weights in our tired brain ignoring one crucial fact that the speaker s labels may be and often are completely different Due to this potential mislabeling what may be the most important victory or heartache of the day for your spouse or partner may accidentally get dragged and dropped into your mind s recycle bin Avoid this unintentional cruelty turn off your filters and listen with your heart As Wesley Snipes advises Woody Herrelson in White Men Can t Jump listen to her or him as the case may be It pays to practice such an unbiased and unconditional listening style It harmonizes your priorities with those your spouse and pulls you away from the abyss of spousal apathy But it takes years of practice to develop the proper listening technique and continued patience and deliberate effort to apply it Where got time we may ask Well let s make time or make the best of what little time we got Otherwise when days add up to months and years we may look back and wonder Where is the life that we lost in living Stress and a Sense of Proportion How can we manage stress given that it is unavoidable in our corporate existence Common tactics against stress include exercise yoga meditation breathing techniques reprioritizing family etc To add to this list I have my own secret weapons to battle stress that I would like to share with you These weapons may be too potent so use them with care One of my secret tactics is to develop a sense of proportion harmless as it may sound Proportion can be in terms of numbers Let s start with the number of individuals for instance Every morning when we come to work we see thousands of faces floating by almost all going to their respective jobs Take a moment to look at them each with their own personal thoughts and cares worries and stresses To each of them the only real stress is their own Once we know that why would we hold our own stress any more important than anybody else s The appreciation of the sheer number of personal stresses all around us if we stop to think about it will put our worries in perspective Proportion in terms of our size also is something to ponder over We occupy a tiny fraction of a large building that is our workplace Statistically speaking the reader of this column is not likely to occupy a large corner office The building occupies a tiny fraction of the space that is our beloved city All cities are so tiny that a dot on the world map is usually an overstatement of their size Our world the earth is a mere speck of dust a few miles from a fireball if we think of the sun as a fireball of any conceivable size The sun and its solar system are so tiny that if you were to put the picture of our galaxy as the wallpaper on your PC they would be sharing a pixel with a few thousand local stars And our galaxy don t get me started on that We have countless billions of them Our existence with all our worries and stresses is almost incomprehensibly small The insignificance of our existence is not limited to space it extends to time as well Time is tricky when it comes to a sense of proportion Let s think of the universe as 45 years old How long do you think our existence is in that scale Eight seconds if we are very lucky We are created out of star dust last for a mere cosmological instant and then turn back into star dust DNA machines during this time we run unknown genetic algorithms which we mistake for our aspirations and achievements or stresses and frustrations Relax Don t worry be happy Sure you may get reprimanded if that report doesn t go out tomorrow Or your trader may bite your head off if that pricing model is delayed again Or your colleague may send out that backstabbing email and Bcc your boss if you displease them But don t you get it in this mind numbingly humongous universe it doesn t matter an iota In the big scheme of things your stress is not even static noise Arguments for maintaining a level of stress all hinge on an ill conceived notion that stress aids productivity It does not The key to productivity is an attitude of joy at work When you stop worrying about reprimands and backstabs and accolades and start enjoying what you do productivity just happens I know it sounds a bit idealistic but my most productive pieces of work happened that way Enjoying what I do is an ideal I will shoot for any day Stress and Metaphysics Realizing that our existence is a mere blink of an eye in time and less than a speck of dust in space is a powerful way of cutting our stress to size My favorite weapon however is even more potent I ask myself a basic question what are space and time to begin with These may sound like silly metaphysical musings that have no relevance to real life But they have been the subject matter of many lifelong quests over the ages If we humanity as a whole cannot stop pondering over such things it is probably because they form the basis of our existence Besides our stress takes place in space and time Philosophical grand standing aside let s get to the meat of the problem What is space Space seems to be closely associated with our sense of sight It also forms the basis of our reality everything happens in space and time For this reason What are space and time is a question that cannot be reduced to simpler elements in our reality We can however approach the issue by posing a similar question What is sound Sound is an experience associated with hearing clearly But what is it The answer is hinted at in the age old conundrum of a falling tree in a deserted forest Does it make sound A popular topic of conservation in cocktail parties this question is also a serious contemplative inquiry for a Zen monk The knee jerk response to the question is yes the tree does make sound It s just that there is nobody to hear it But hear what exactly Sure the falling tree creates air pressure waves But the waves are not sound These waves create an electrical signal in the ear if an ear is present Electrical signals are electrical signals not sound These signals when transported to the brain induce neuronal firing which is still not sound It is a fallacy to think of sound as anything physical anything real Sound is an experience or a cognitive representation associated with the input signals which are the pressure waves we think But are they We can draw similar analogies between other sensations and the corresponding signals taste and smell to chemical composition for instance What about sight What is the sensation or the cognitive representation associated with sight

    Original URL path: http://www.thulasidas.com/category/columns/the-wilmott-magazine-columns/page/4/ (2016-02-16)
    Open archived version from archive

  • Food Prices and Terrible Choices - Unreal Blog
    the prices of everything Is the recent OPEC windfall driving the price hikes What about the food subsidies in wealthy nations that skew the market in their favour Yet another economics hand puts the blame squarely on the supply side It points an unwavering finger at the poor weather in food producing countries and the panic measures imposed on the supply chain such as export bans and smaller scale hoarding that drive up the prices I m no economist and I would like just one hand one opinion that I can count on In my untrained view I suspect that the speculation in commodities market may be driving the prices up I felt vindicated in my suspicions when I read a recent US senate testimony where a well known hedge fund manager Michael Masters shed light on the financial labyrinth of futures transactions and legal loopholes through which enormous profits were generated in commodity speculation The real reasons behind the food crisis are likely to be a combination of all these factors But the crisis itself is a silent tsunami sweeping the world as the UN World Food Program puts it Increase in the food prices though unpleasant is not such a big deal for a large number of Singaporeans With our first world income most of us spend about 20 of our salary on food If it becomes 30 as a result of a 50 increase in the prices we certainly won t like it but we won t suffer that much We may have to cut down on the taxi rides or fine dining but it is not the end of our world If we are in the top 10 of the households we may not even notice the increase The impact of the high food prices on our lifestyle will be minimal say a four star holiday instead of a five star one It is a different story near the bottom If we earn less than 1000 a month and we are forced to spend 750 instead of 500 on food it may mean a choice between an MRT ride and legging it At that level the increase in food prices does hurt us as our grim choices become limited But there are people in this world who face a much harsher reality as the prices shoot up with no end in sight Their choices are often as terrible as Sophie s choice Which child goes to sleep hungry tonight Medicine for the sick one or food for the rest We are all powerless against the juggernaut of market forces creating the food crisis Although we cannot realistically change the course of this silent tsunami let s at least try not to exacerbate the situation through waste Buy only what you will use and use only what you need to Even if we cannot help those who will invariably go hungry let s not insult them by throwing away what they will die yearning for Hunger is

    Original URL path: http://www.thulasidas.com/food-prices-and-terrible-choices/ (2016-02-16)
    Open archived version from archive



  •