In the forum this week (selected only)
- I started posting a series of comments attached to the ongoing revision of our learning spreadsheets here at https://forum.bionicturtle.com/threads/frm-t1-foundation-learning-spreadsheets-commentary.10427/
- [P1.T2] What do we really mean by, the regression slope is significant? https://forum.bionicturtle.com/thre...near-regression-topic-review.7256/#post-49612
- [P1.T2] GARCH’s beta, β, is analogous to EWMA’s lambda, λ: they are both constant ratios of consecutive weights https://forum.bionicturtle.com/thre...hemes-to-estimate-volatility.3932/#post-49663
- [P1.T2] @emilioalzamora1 shows how to reduce the minimum variance portfolio (MVP) under perfect correlation https://forum.bionicturtle.com/threads/p1-t2-305-minimum-variance-hedge-miller.6800/#post-49498
- [P1.T2] Sample skew adjustment factor explained by @emilioalzamora1 https://forum.bionicturtle.com/thre...utional-moments-topic-review.7232/#post-49596
- [P1.T2] Epic help from @emilioalzamora1 on Chebyshev’s Inequality https://forum.bionicturtle.com/threads/p1-t2-315-millers-hypothesis-tests-continued.7128/#post-49707
- [P1.T4] The importance of terminology (i.e., my imprecision!) in the relationship between vega and option maturity (or time to maturity) https://forum.bionicturtle.com/threads/p1-t4-402-option-vega.7672/#post-49661
- [P1.T5] Can parametric VaR be non-normal? (important) https://forum.bionicturtle.com/thre...tric-approaches-topic-review.6096/#post-49695
- [P2.T6] Terrific catch by @moaschtee of my mistake concerning the relationship between ES and VaR in a CDS https://forum.bionicturtle.com/threads/p2-t6-413-credit-exposure-profiles.7774/page-2#post-49703
- [P2.T6] About the SPV in a synthetic CDO https://forum.bionicturtle.com/thre...vatives-cln-cdo-topic-review.6227/#post-49629
- [P2.T6] Wrong-way risk due to common industry participation https://forum.bionicturtle.com/threads/p2-t6-419-wrong-way-counterparty-risk.7900/page-2#post-49594
- [P2.T6] Malz’ CVA formula https://forum.bionicturtle.com/threads/spot-rate-vs-swap-rate.10272/ Is is just me, or doesn't Malz' discount factor have a typo?
- [P2.T8] M-squared (Modigliani-squared) probably should be a relatively quick calculation for you, if you are thinking about it correctly https://forum.bionicturtle.com/threads/m-squared-adjusted-portfolio.10425/
- [P2.T8] Is an equity market neutral hedge fund a good candidate for portable alpha? https://forum.bionicturtle.com/thre...ral-hedge-funds-topic-review.7768/#post-49630
- [P2.T8] Incremental value at risk (incremental VaR) can be a little bit of a counterintuitive mind-bender when the portfolio is only two asset https://forum.bionicturtle.com/thre...nent-value-at-risk-var.4779/page-2#post-49685 … related: https://forum.bionicturtle.com/thre...ental-and-diversified-value-at-risk-var.4768/
- [GARP 2017 P2.74] Great observation by @WhizzKidd of a mistake in the practice question about the value of a credit default swap (CDS) when the reference entity spread widens and wrong-way risk (WRR) https://forum.bionicturtle.com/threads/garp-2017-p2-74.10430/
- [GARP 2017 P2.45] Great observation by @bpdulog to spot a mistake in this practice question about netting https://forum.bionicturtle.com/threads/garp-2017-p2-45.10343/
- One Take on the Report of the Independent Directors of Wells Fargo: Vote the Bums Out https://corpgov.law.harvard.edu/201...t-directors-of-wells-fargo-vote-the-bums-out/ … but they survived: Wells Fargo investors send message of dissatisfaction in narrow board vote http://www.latimes.com/business/la-fi-wells-fargo-vote-20170424-htmlstory.html
- Goldman Makes Case for Volcker Rule https://www.bloomberg.com/gadfly/ar...debt-trading-miss-makes-case-for-volcker-rule
- The death of the bank branch has been greatly exaggerated http://www.businessinsider.com/kbw-on-physical-bank-branches-2017-4
- Has there been a sea change in the way banks respond to capital requirements? https://bankunderground.co.uk/2017/...he-way-banks-respond-to-capital-requirements/
- Twelfth progress report on adoption of the Basel regulatory framework https://www.bis.org/bcbs/publ/d404.htm
- Federal Reserve Restructuring Part of Its Large Bank Supervision Program (Changes aim to streamline subgroups to reduce overlap and clarify roles) https://www.wsj.com/articles/federa...its-large-bank-supervision-program-1493226055
- Taking a long hard look in the mirror: should the leverage ratio reflect Pillar 2? http://trtl.bz/2pASTT8
- The Global Systemically Important Banks: An Update (by Timothy Taylor) http://conversableeconomist.blogspot.com/2017/04/the-global-systemically-important-banks.html
- How Trump and Brexit Could Change Global Bank Rules (As two big economies chart a new course, some fear regulatory arbitrage, bloomberg.com) http://trtl.bz/2pB4oKp
- Venezuela's Complicated Crisis For Oil https://www.bloomberg.com/gadfly/articles/2017-04-25/venezuela-s-oil-crisis-not-just-a-supply-shock “The country currently occupying the unenviable position of being the likeliest source of a supply shock is Venezuela. The collapse in oil prices has savaged the country's economy and brought political tensions to a head in the form of a constitutional crisis, mass protests and, particularly over the past week or so, looting and fatalities.”
- Venezuelans Are Trying To Crowdfund Money To Leave The Country (buzzfeed.com) http://trtl.bz/2oYo6fa
- Social Unrest Is France's Biggest Risk https://www.bloomberg.com/view/articles/2017-04-26/social-unrest-is-france-s-biggest-risk
- Huge Arctic report ups estimates of sea-level rise https://www.nature.com/news/huge-arctic-report-ups-estimates-of-sea-level-rise-1.21911
- Recency Bias: Avoid the Temptation http://www.air-worldwide.com/Blog/Recency-Bias--Avoid-the-Temptation/
- CBInsights’ Global Fintech Report (Q1 2017) here http://trtl.bz/2qqn8dm
- An obscure regulatory debate has put the entire U.S. fintech community on edge (techcrunch.com) https://techcrunch.com/2017/04/24/a...put-the-entire-u-s-fintech-community-on-edge/
- Where Do Banks Fit in the Fintech Stack? By Federal Reserve Governor Lael Brainard https://www.federalreserve.gov/newsevents/speech/brainard20170428a.htm
- Venture-Capital Firms Use Big Data to Seek Out the Next Big Thing (A small group of firms hope to use analytics to gain an advantage over mere humans, wsj.com) http://trtl.bz/2pAU9Wd
- New York Publishes FAQs and Key Dates for Cybersecurity Regulation http://trtl.bz/2pB011L
- How Banks Can Compete Against an Army of Fintech Startups https://hbr.org/2017/04/how-banks-can-compete-against-an-army-of-fintech-startups
- What happens to insurance once our cars are autonomous? http://trtl.bz/2pAXRza
- [GARP] Six Great Reasons YOU Should Learn to Code http://trtl.bz/2pBFtGy
- Disruptive Technologies Present Opportunities for Risk Managers, Study Finds http://trtl.bz/2puGsIv Survey is here http://trtl.bz/RIMS-2017-Excellence-RM
- Stanford top in MBA ranking for jobs in finance https://www.ft.com/mbaforfinance
- Where College Seniors Are Falling Short https://www.wsj.com/articles/where-college-seniors-are-falling-short-1493118000
- Adaptive Markets, by Andrew Lo (ft.com) http://trtl.bz/2oWwUSt “A remarkable new paradigm puts human instinct at the heart of market behaviour … The result is dazzling in both its erudition and its charm. I suspect that Lo’s book will join the financial texts that have come to symbolise schools of thought in the public mind, like Burton Malkiel’s A Random Walk Down Wall Street (1973) or Nassim Nicholas Taleb’s The Black Swan (2007).”
- Q&A with Michael Covel author of Trend Following: How to Make a Fortune in Bull, Bear, and Black Swan Markets http://trtl.bz/2oNc3RD
- The Business-School Boondoggle (“The Golden Passport” by Duff McDonald is a deliciously iconoclastic history of Harvard Business School) https://www.wsj.com/articles/the-business-school-boondoggle-1492809680
- A Student Loan Giant [Navient] Is The Most Complained-About Financial Company In America (buzzfeed.com) http://trtl.bz/2oWp0ZE
- Bold Action Needed for Retirement Saving https://www.bloomberg.com/gadfly/ar...ction-needed-to-improve-saving-for-retirement
- Visualizing IRA Rules Using FlowCharts http://trtl.bz/2pACBKa Great idea! Here is their 2017 IRA/ROTH http://trtl.bz/2oQFAPa
- A New Way to Score Credit Risk: Psychometric Assessments http://www.fico.com/en/blogs/risk-c...o-score-credit-risk-psychometric-assessments/ “The scoring methodology was developed by EFL Global and marketed by FICO as part of our FICO Financial Inclusion Initiative, designed to open up credit markets around the world to a larger number of unbanked and underserved consumers. Sovcombank, a universal bank with more than 2 million customers, is using the score to gamify the credit application process. The EFL credit risk score is created through a dynamic behavioral design and psychometric assessment that analyzes character traits with a proven relationship to credit risk. It’s an ideal approach for applicants who do not have a credit history and therefore cannot be scored using traditional methods.”
- Big Changes Coming to How This Credit Score Is Calculated https://thepointsguy.com/2017/04/changes-credit-score-calculations/ “The credit bureaus Experian, TransUnion and Equifax will be rolling out changes to their scoring system called VantageScore.”
- Facebook and the cost of monopoly https://stratechery.com/2017/facebook-and-the-cost-of-monopoly/ Good use of supply/demand curves “"The latter of these plans was just announced just last week, and it involves a team of 60 engineers working to find a way to translate your thoughts into Facebook updates. Using non-invasive optical imaging to scan your brain a hundred times per second, eventually the goal is to allow people to type at 100 words per minute, a 5x increase over normal phone typing speeds"
- The Progress of Facebook’s 10-Year Masterplan http://www.visualcapitalist.com/facebook-10-year-masterplan/
- Ten Year Futures http://ben-evans.com/benedictevans/2017/4/24/ten-year-futures “So, we have these hugely important new technologies coming, but not quite here yet. At the same time, though, we have a set of more immediate changes, that have much more to do with consumer behaviour, company strategy and economic 'tipping points' than with primary, frontier technology of the kind that Magic Leap or Waymo are building … All of this change affects huge pools of capital.”
- Once-Flush Startups Struggle to Stay Alive as Investors Get Pickier https://www.wsj.com/articles/once-f...tay-alive-as-investors-get-pickier-1492948802
- The Statistics of Coin Tosses for Theater Geeks https://daily.jstor.org/statistics-of-coin-tosses-theater-geeks/ “The coin is our simplest material connection to randomness.”
- How do investors evaluate founding teams? https://medium.com/village-capital/how-do-investors-evaluate-founding-teams-7ba012de6384 “Several months ago, our team set out to tilt against the windmills — to create a new tool to identify and communicate what makes a founder strong … Spontaneity can have its downsides. The most successful businesses in the study had founders that were focused, calculated, and deliberate.”
- The Importance of Nonfinancial Performance to Investors https://corpgov.law.harvard.edu/2017/04/25/the-importance-of-nonfinancial-performance-to-investors/ “The appeal of ESG analysis in risk management: One of the key benefits provided by ESG analysis for investors is risk avoidance and measurement.” Report is here http://trtl.bz/2oQAgLV
- Ernst & Young on ESG Reporting http://www.allaboutalpha.com/blog/2017/04/23/ernst-young-on-esg-reporting/
- Big 4 Audit Quality Hiding in Plain Sight: Restatement Mentions in PCAOB Reports http://goingconcern.com/audit-quality-restatements-pcaob-big-4/
- Do the FASB’s Accounting and Reporting Standards Add Shareholder Value? https://corpgov.law.harvard.edu/201...nd-reporting-standards-add-shareholder-value/
- Unroll.me’s CEO is ‘heartbroken’ that users are upset their data was sold to Uber http://www.theverge.com/2017/4/24/15406408/unrollme-uber-data-brokerage-apology-letter
- United Says Litany of Failures Led to Flight Fiasco https://www.wsj.com/articles/united-says-litany-of-failures-led-to-flight-fiasco-1493269261
- Taking Charge of Disruptive Technology Risks http://www.brinknews.com/taking-charge-of-disruptive-technology-risks/ Their list of 13 common disruptive technologies looks pretty good to me. http://trtl.bz/2p26pfu
- MARSH RIMS Excellence in Risk Management XIV (Ready Or Not, Disruption Is Here: How risk professionals are addressing the challenges of disruptive technology) pdf here at http://trtl.bz/2qfKu8c
- 2017 RIMS Benchmark Survey https://www.rims.org/aboutRIMS/Newsroom/News/Pages/Benchmark2017.aspx (cost is $899.00)
- Turning Around Risk Culture (Lessons from a Submarine Captain) https://www.linkedin.com/pulse/turning-around-risk-culture-lessons-from-submarine-captain-corless
- Fascinating share by @Maged on the highly subjective interpretations and perceptions of probability when words and phrases are used rather than numbers https://forum.bionicturtle.com/threads/difference-between-probable-and-highly-likely.10431/ “If you want to communicate with precision, it’s best to use numbers or specific odds."
- Creating Simple Rules for Complex Decisions https://hbr.org/2017/04/creating-simple-rules-for-complex-decisions Not profound but an intuitive application of linear regression in their “select-regress-round” approach. Their technical paper is here http://trtl.bz/2pQ3Jph
- Fantastic Lies and How to Find Them (Detecting Fraud Using the Mathematics Behind Benford’s Law) https://ofdollarsanddata.com/fantastic-lies-and-how-to-find-them-82f084249296
- Fat-tails everywhere even if volatility is low http://mrzepczynski.blogspot.com/2017/04/fat-tails-everywhere-even-if-volatility.html “I was reviewing an interesting research piece from Covenant Capital on kurtosis across different assets traded in the futures markets. They offer a spreadsheet tool that can allow anyone to find the number of fat-tailed occurrences relative to a normal distribution. The data show that there are fat-tails everywhere across all asset classes. We do not live in a normal distribution world.” Here is brief paper (The Persistence of Kurtosis in Financial Markets) with link to their tool http://trtl.bz/2pB3ei0
- How your selfie could affect your life insurance http://trtl.bz/2puQLfM “Several life insurance companies are testing Lapetus technology that uses facial analytics and other data to estimate life expectancy …” Here is the fascinating company featured, Lapetus https://www.lapetussolutions.com/about and their whitepaper http://trtl.bz/2oQF7Ne
- Measuring Interest Rate Risk in the Very Long Term (Federal Reserve Bank of San Francisco) http://trtl.bz/2oREgqx
- What I’ve learned in a year building a startup that files health insurance claims https://medium.com/@BetterClaims/what-ive-learned-building-better-fd8f08614cfd “Members’ policies are written in intentionally ambiguous language … Insurance companies run a system that is confusing by design. Insurance companies have created systems that are cumbersome and error prone by design. About 15 or 20 percent of the time, phone calls will just drop. For no discernible reason, an automated system or tele-robot will chime in with a “Goodbye” and then hang up. Companies frequently lose documentation and files, which we have to re-send in through fax machines or mail. Then their OCR, or optical character recognition systems for reading these claims, are terrible.”
- Morningstar’s New Funds Gambit: Opportunity and Controversy http://www.barrons.com/articles/morningstars-new-funds-gambit-opportunity-and-controversy-1492836713
- Creating a VIX Futures Term Structure In R From Official CBOE Settlement Data http://trtl.bz/2oYwX0d
- A trading startup is setting out to tackle a key problem in the world's most important market http://www.businessinsider.com/opendoor-securities-launch-2017-4 “However, liquidity in the Treasury market is divided between on-the-run Treasurys, or the most recently issued bonds and therefore the most liquid, and off-the-run bonds. Off-the-run bonds represent 98% of the total outstanding issuance in the US Treasury market, according to OpenDoor, but account for less than a third of average daily trading volume.”
- Conflicts of Interest in Securitization and the U.S. Housing Crisis (Federal Reserve Bank of Atlanta) http://trtl.bz/2pAPCTQ
- The Hedge Fund Manager Who’s Shorting America’s Malls https://www.wsj.com/articles/the-hedge-fund-manager-whos-shorting-americas-malls-1493220669 “The CMBX 6 is an index of credit-default swaps designed to mimic the performance of 25 commercial mortgage-backed securities (CMBS) issued in 2012.”
- [BIS] Arbitrage costs and the persistent non-zero CDS-bond basis: Evidence from intraday euro area sovereign debt markets https://www.bis.org/publ/work631.htm
- The 93 Words That Could Unlock $200 Billion in Bank Capital (Proposed changes in the way banks calculate the size of their financial cushion against operational risk could free up a windfall) https://www.wsj.com/articles/the-93...00-billion-in-trapped-bank-capital-1493553602 “At Bank of America Corp. , a big portion of the firm’s operational-risk exposure stems from its purchase of Countrywide Financial, the defunct subprime lender for which it has already paid billions of dollars in fines and settlements. Operational risk accounted for $500 billion of the bank’s $1.5 trillion in risk-weighted assets at the end of 2016.”
- Shortcuts to Factor Investing: Equities and Beyond https://blogs.cfainstitute.org/inve...cuts-to-factor-investing-equities-and-beyond/ “Let’s begin with a reminder of a working definition of a systematic factor, and why these factors are relevant to investment professionals, as outlined in a paper by Andrew Ang of BlackRock. According to Ang, a factor must have the following characteristics: 1. Be proven in the finance literature, 2. Demonstrated notable excess premiums over benchmarks that are predicted to continue, 3. Have a transparent return history that includes down periods, and 4. Be implementable in liquid, traded instruments.”
- Why quants don't pick stocks https://blog.thinknewfound.com/2017/04/quants-dont-pick-stocks/ This is good; e.g.,"CAPM stands in direct opposition to the practice of stock picking," "Risk Factor vs. Risk Premia vs. Anomaly"
- Just Say NO To Angel Investing http://www.financialsamurai.com/just-say-no-to-angel-investing/
- Wall Street’s New Problem: When Fund Titans Invest on the Side https://www.wsj.com/articles/wall-streets-new-problem-when-fund-titans-invest-on-the-side-1493218214
- Rob Arnott (Godfather of Smart Beta) Tells Investors: You’re Doing It Wrong (In series of papers, investing pioneer casts doubt over merits of momentum strategies, valuations of low-volatility funds) at wsj.com http://trtl.bz/2pAO3W4
- Risk-Wary Banks Chill Bitcoin Market (At least three exchanges have said in recent weeks they can’t process transactions in dollars, wsj.com) http://trtl.bz/2oYpka0
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Here is the link to this week's blog: 