There is a lot of current interest in various “crypto currencies” such as Bitcoin, but that does not mean there have not been previous combined ledger and token recording systems. Others have noticed the relevance of Crawfurd v The Royal Bank (the case where money became money), and we are […]

Estimated reading time: 10 minutes

We have previously written that we like the investment performance summary called the Sharpe ratio (though it does have some limits). What the Sharpe ratio does is: give you a dimensionless score to compare similar investments that may vary both in riskiness and returns without needing to know the investor’s […]

Estimated reading time: 12 minutes

Having worked in finance I am a public fan of the Sharpe ratio. I have written about this here and here. One thing I have often forgotten (driving some bad analyses) is: the Sharpe ratio isn’t appropriate for models of repeated events that already have linked mean and variance (such […]

Estimated reading time: 8 minutes

Bitcoin continues to surge in buzz and price (194,993 coin transfer, US Senate hearings and astronomical price and total capitalization). This gets me to thinking: what in finance terms is Bitcoin? It claims aspire to be a currency, but what is it actually behaving like?

Estimated reading time: 15 minutes

von Neumann and Morgenstern’s “Theory of Games and Economic Behavior” is the famous basis for game theory. One of the central accomplishments is the rigorous proof that comparative “preference methods” over fairly complicated “event spaces” are no more expressive than numeric (real number valued) utilities. That is: for a very […]

Estimated reading time: 28 minutes

This is an elementary mathematical finance article. This means if you know some math (linear algebra, differential calculus) you can find a quick solution to a simple finance question. The topic was inspired by a recent article in The American Mathematical Monthly (Volume 117, Number 1 January 2010, pp. 3-26): […]

Estimated reading time: 11 minutes

New paper: A Discrete Model Gauging Market Efficiency PDF We highly recommend reading the PDF version, but please find below a HTML translation of the paper. We follow up on some interesting work from the literature and explore some conditions that allow large predatory traders to dominate markets.

Estimated reading time: 39 minutes

A bit of a tempest in finance news involving accusations of sensitive code stolen from a major trading desk. For emerging details see: Special Agent Michael G. McSwain’s charges Mathew Goldstein’s Reuters article Zero Hedge blog entry

Estimated reading time: 4 minutes

There is plenty of blame to go around from the current global financial crisis. But, I would like to point out that it is not “all the quants’ fault.” We are all now, unfortunately, sitting in the middle of a high quality (and extremely expensive) lesson in financial mathematics. I […]

Estimated reading time: 11 minutes