Links for Later, May 24, 2021

1. Neutrality with regard to the distribution of income necessitates a Social Welfare Function that is inversely proportional to each individual's marginal utility of wealth - Brad DeLong, a Non-Sokratic Dialog
2. https://doctorow.medium.com/the-memex-method-238c71f2fb46 -Cory Doctorow, The Memex Method
3. Deleted Scene from Maggie Stiefvater's Mr. Impossible, from the POV of Adam Parrish https://drive.google.com/file/d/1eEFBlh3JU7S9M40FqlZZZtNJRT_mDP3e/view
4. Fourier neural network for solving partial differential equations such as Navier-Stokes. AI has cracked a key mathematical puzzle for understanding our world | MIT Technology Review

Links for Later 9-9-17

1. A collection of reviews/recaps of the new season of Twin Peaks.
2. Bruce Chatwin profile.
3. Comparing algorithms for decision statistics and machine learning.
4. Narwhals beating the hell out of cod with their tusks.
5. Searching for silphium, the prized, probably extinct Roman herb.
6. The impending death of football, as parents stop signing their kids up to play due to brain injury fears. Could not come too soon.

Links for Later 6-14-17

1. Using topology to describe "11 dimensional structures" in the brain. Not as exciting as it sounds--they are not physical dimensions, but mathematical ones.
2. Library porn I: touring the libraries of Italy.
3. Library porn II: Thibaud Poirier's photographs of empty libraries. 
4. Mass shooting occurs at GOP baseball practice. Majority Whip Steve Scalise shot.

Links for Later 5-15-17

1. Statistician David Aldous critiques Nassim Taleb. “My own overall reaction is that Taleb is sensible (going on prescient) in his discussion of financial markets and in some of his general philosophical thought, but tends toward irrelevance or ridiculous exaggeration otherwise.”
2. Profile of publisher and printer Gerhard Steidl.
3. "Radicalism begins with the body" Junot Diaz interviews Samuel R Delany.
4. Hypnogogia and lucid dreaming with the help of oneirogens.

Startup Geometry EP 016 Emanuel Derman

Emanuel Derman first had a successful career as a particle physicist, and then an even more  successful career on Wall Street, doing advanced mathematical modeling of financial instrument prices and volatility. Currently, he is a professor at Columbia University, where he directs the program in financial engineering. He's the author of My Life as a Quant and Models.Behaving.Badly.

Today, we talk about the differences between models & theories, finance & physics, and life & experiments. We look under the hood of the Black-Scholes[-Merton] option pricing formula, talk about the gaps in classical and behavioral financial models, and find out what he would change about his life if he could live it again.

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Show Notes and Links

Emanuel Derman
emanuelderman.com
Faculty Page
On twitter: @EmanuelDerman
Books: My Life as a Quant, Models.Behaving.Badly

[0.47] Intro. Models & Theories.
[3.45] What differentiates a theory or model in physics from one in finance?
[5.43] How to protect yourself from self-deception.
[6.55]William Blake "If a fool were to persist in his folly, he would become wise."
[7.26] At Goldman, they used models without idolizing them.
[8.40] What do you teach your students at the Columbia Financial Engineering Program?
[10.15] Example: Black-Scholes[-Merton] model for option pricing. Andy Lowes at MIT, "In physics, you have three laws that explain 99% of phenomena. In finance, you have 99 laws that explain 3% of phenomena."
[12.15] Principle of replication (arbitrage pricing theory).
[16.20] What you need to know to price a derivative. How does it fail? Correcting for that. Paul Wilmott.
[22.02] Physics: better to go deep (abstract principles). Finance: sometimes better to stay on the surface. Eugene Fama: "Finance is what doesn't go away after everyone knows about it." Elon Musk: importance of thinking by first principles vs. thinking by analogy.
[24.50] ED's favorite models. Black-Derman-Toy for interest rate. Local volatility model. Extensions of option pricing. Fixing and extending models by relaxing perfect/Platonic assumptions. Mao Tse-tung: "Let a thousand flowers bloom."
[27.07] Nassim Taleb's critiques of financial  modeling. Heuristics.
[29.30] Using the process of model-building to help discipline your thoughts. Quantifying vague intuitions.
[31.50] Institutional problems. Understanding the underlying assumptions.
[33.17] Exciting areas in finance research. Moving from derivatives to the underlying assets. Market microstructure.
[36.00] Behavioral finance. (I'm a bigger fan of finding better psychological bases to economic behavior and economic concepts like risk or utility, rather than disguising social psychology research as economics through the use of math. That's what I'm babbling about in this section. -SG). Subjectivity in economic models: it's actually "How much money do I stand to gain or lose
Hayek: In physics, the macroscopic things are sense data and real...and atoms are the abstractions. In finance, the only things that are real are the people, the markets are the abstractions. Mel Brooks on comedy vs. tragedy.
[44.24] Recommended reading: Justin Fox The Myth of the Rational Market, John Kay Other People's Money, Emanuel Derman Models.Behaving.Badly, Nassim Taleb's Black Swan & Antifragile, Elie Ayache The Blank Swan & The Medium of Contingency.
[48.48] Manfred Eigen
[49.12] More about Emanuel Derman can be found at..., What he would like to do if he could relive his life over again, How you can respond to a model vs. a theory.

The Models
Monte Carlo method
Black-Scholes-Merton
CAPM
Efficient Market Hypothesis
Geometric Brownian motion (random walk, martingale)
Jump diffusion models
Black-Derman-Toy interest rate model
Derman-Kani trees/ volatility smile models

Links for Later 9-20-15

1. Canada's vanishing data and archives.
2. Warren Ellis' work tools.
3. Are Ad Blockers ethical? I say yes.

Links for Later 3-14-15

1. Michael Lewis follows up on Flash Boys. Charles Schwab's sales of its customers' transactions and transaction data to third parties (HFT traders and others) comes up both in the article and the book.
2. Adam Nash of Wealthfront also has a bone to pick with Charles Schwab, citing hidden revenues in Schwab's investment strategy and sweep accounts.
3. Saras Sarasvathy's theory of effectual entrepreneurship gets some thumbs up.
4. Marina Warner's description of the many ways that higher ed is broken (in the UK especially, but a lot of this applies in the US as well).

Links for Later 7-22-14

1. What Fourier tranforms can do for you.
2. Andrew Gelman: "Bayesian methods are presented as an automatic inference engine, and this raises suspicion in anyone with applied experience, who realizes that different methods work well in different settings" as quoted in this critique of Bayesian stats.

Links for Later 9-26-13

1. Giordano Bruno's prediction of the infinite worlds and an infinite God made the Catholic Church freak out.
2. Using vector space mathematics to resolve linguistic problems.
3. Entrepreneurial sales: five models, four steps to success.
4. Urban exploration with Bradley Garrett.
5. Steve Albini's letter to Nirvana about producing.
6. Brad DeLong about the economics of global warming. Can we afford to do something? Can we afford not to?
7. OODA loops and markets.

Blog All the Foxeared Pages: Buckminster Fuller's Synergetics

Part 2 of online notebook for the readthrough of Synergetics, an online version of which may be found at:
http://www.rwgrayprojects.com/synergetics/synergetics.html
I am reading the 1982 version of the 1975 text from MacMillan.

400.06 Thought is systemic. Cerebration and intellection are initiated by differential discernment of relevance from nonrelevance in respect to an intuitively focused-upon complex of events which also intuitively suggests inherent and potentially significant system interrelatedness.

400.07 Human thoughts are always conceptually and definitively confined to system considerability and comprehension. The whole Universe may not be conceptually considered by thought because thinkability is limited to contiguous and contemporary integrity of conformation of consideration, and Universe consists of a vast inventory of nonsynchronous, noncontiguous, noncontemporary, noncoexisting, irreversibly transforming, dissimilar events. 400.24   General systems theory is another example of evolution by inadvertence. It developed fortuitously to accommodate the unprecedented and vastly complex undertakings of the late twentieth century, such as the 10 million separate and only partially overlapping "critical path" tasks that had to be accomplished and tested to foolproof reliability en route to countdown to eventual blastoff, Moon landing, and safe return to Earth, which found all conventional mathematical theory wanting. It required the development of the computer and star-focused instruments and computer programming arts together with operational research, which guess-improvises the inventory of parameter of variables that must be progressively programmed into the system in order further to reduce the magnitude of tolerated errors consequent to trial "bird" (rocket vehicle) "flight" (trajectory) control as the vehicles are progressively zeroed-in to progressive target rendezvous with celestial entities. Neither differential and integral calculus, nor "probability" statistics, nor any branch of specialized hard science has accredited synergy as an a priori assumption. General systems theory, which recognizes synergy as inherent, was discovered and named by the biologically inspired Ludwig von Bertalanffy. 422.10 Force Distribution: In the three-way grid octet truss system, concentrated energy loads applied to any one point are distributed radially outward in nine directions and are immediately diffused into the finite hexagonally arranged six vectors entirely enclosing the six-way-distributed force. Each of the hexagon's six vertexes distribute the loads 18 ways to the next outwardly encircling vectors, which progressively diffusing system ultimately distributes the original concentrated energy force equally to all parts of the system as with a pneumatic tire. Thus the system joins together synergetically to distribute and inhibit the forces. 422.20 Geometry of Structure: Considered solely as geometry of structure, the final identification of the octet truss by the chemists and physicists as closest packing also identifies the octet truss and vector equilibria structuring as amongst the prime cosmic principles permeating and facilitating all physical experience. 502.31 The difference between synergetics and conventional mathematics is that it is derived from experience and is always considerate of experience, whereas conventional mathematics is based upon "axioms" that were imaginatively conceived and that were inconsiderate of information progressively harvested through microscopes, telescopes, and electronic probings into the nonsensorially tunable ranges of the electromagnetic spectrum. Whereas solids, straight lines, continuous surfaces, and infinity seemed imaginatively obvious, i.e., axiomatic; physics has discovered none of the foregoing to be experimentally demonstrable. The imaginary "abstraction" was so logical, valid, and obviously nonsolid, nonsubstantial in the preinstrumentally-informed history of the musings of man that the mathematician assumed abstraction to be systemic conceptuality, i.e., metaphysical absolutely devoid of experience: He began with oversight. 502.50 Experiment 502.51 A voluntary experience is an experiment. To be experimental, we must have an observer and the observed, the articulator and the articulated. Experiences include experiments: there are experimentally demonstrable cyclic regularities, such as frequencies of the occurrence of radiation emissions of various atomic isotopes, which become the fundamental time increment references of relative size measurement of elemental phenomena. 502.60 Happening 502.61 An involuntary experience is a happening. To be experiential, to have a happening, we must have an observer and the observed. 503.00 Happenings 503.01 A happening is an involuntary experience. You cannot program "happen." 503.02 Happenings contradict probability. That's why they are happenings. Probability is not a reliable anticipatory tool; it is stronger than "possibility" but crude in comparison to "navigation" and "astronomy." If probability were reliable, there would not be a stock market or a horse race. 529.03 Newton said that time was a very specific phenomenon, assuming that there was a specific and finite time that permeated Universe and that everything observable in Universe was occurring at the same time. It was Einstein who discerned that time might be relative to the individual observer. A majority of academic people and the vast majority of nonscientists are still thinking in terms of the classical Newtonian scientific conceptioning of "instant Universe." While light's speed of approximately 700 million miles per hour is very fast in relation to automobiles, it is very slow in relation to the "no time at all" of society's obsolete instant-Universe thinking. It was part of the classical scientist's concept of instant Universe that Universe is a system in which all parts affect one another simultaneously in varying degrees. Contemporary science as yet assumes that all local systems in physical Universe are instantly and simultaneously affecting one another in widely ranging degrees of influence. (And the degrees of influence are governed by relative proximity.) Whereas radiation, i.e., entropy, casts shadows and gravity, syntropy, does not; and whereas the tensional integrity of Universe and all its substructurings is continuous and omniembracing__while compression is islanded and discontinuous__it may also be that while light and radiation has a velocity, gravity is timeless and eternally instant. 529.32 Intuition derives from the approximate instantaneity of intellect, which is much faster than any physical phenomenon like the brain lags. Intuition is the absolute- velocity insistence of the intellect upon the laggingly reflexed brain to call its attention to significance of various special-case, brain-registered, experience relationships. Intuition is intellect coming instantly in at highest speed into dominance over lower-speed, lagging brain reflexing. 529.33 Eternity is simply highest speeds: not "at rest," because it gets there in no- time-at-all: Complete intellection + Otherness + No-time-at-all. Afterpiece  The phenomenon lag is simply due to the limited mechanism of the brain.We have to wait for the afterimage in order to realize. The norm of Einstein is absolute speed instead of at rest. "At rest" was what we called instantaneous in our innocence of yesterday. We evolute toward ever lesser brain comprehension lags__ergo, toward ever diminishing error; ergo, ever diminishing misunderstandings; ergo, ever diminishing fear, and its brain-lagging painful errors of objectivity; wherefore we approach eternal instantaneity of absolute and total comprehension. The eternal instantaneity of no lag at all. However, we have now learned from our generalizations of the great complexity of the interactions of principles as we are disembarrassed of our local, exclusively physical chemistry of information-sensing devices__that what is approached is eternal and instant awareness of absolute reality of all that ever existed. All the great metaphysical integrity of all the individuals, which is potential and inherent in the complex interactions of generalized principles, will always and only coexist eternally.

Blog All the Foxeared Pages: Buckminster Fuller's Synergetics

Online notebook for the readthrough of Synergetics, an online version of which may be found at:
http://www.rwgrayprojects.com/synergetics/synergetics.html
I am reading the 1982 version of the 1975 text from MacMillan.

141.00 There is a corollary of synergy known as the Principle of the Whole System, which states that the known behaviors of the whole plus the known behaviors of some of the parts may make possible discovery of the presence of other parts and their behaviors, kinetics, structures, and relative dimensionalities.

152.00 Synergetics is the exploratory strategy of starting with the whole and the known behavior of some of its parts and the progressive discovery of the integral unknowns and their progressive comprehension of the hierarchy of generalized principles.

153.00 Universe apparently is omnisynergetic. No single part of experience will ever be able to explain the behavior of the whole. The more experience one has, the more opportunity there is to discover the synergetic effects, such as to be able to discern a generalized principle, for instance. Then discovery of a plurality of generalized principles permits the discovery of the synergetic effects of their complex interactions. The synergetic metaphysical effect produced by the interaction of the known family of generalized principles is probably what is spoken of as wisdom.

162.00 There are eternal generalizations that embrace a plurality of generalizations. The most comprehensive generalization would be that which has U = MP, standing for an eternally regenerative Universe of M times P, where M stands for the metaphysical and P stands for the physical. We could then have a subgeneralization where the physical P = E^r· E^m, where E^r stands for energy as radiation and E^m stands for energy as matter. There are thus orders of generalization in which the lower orders are progressively embraced by the higher orders. There are several hundred first-order generalizations already discovered and equatingly formalized by scientist-artists. There are very few of the higher order generalizations. Because generalizations must hold true without exception, these generalizations must be inherently eternal. Though special-case experiences exemplify employment of eternal principles, those special cases are all inherently terminal; that is, in temporary employment of the principles.

229.02 The notion that commencing the exploration of the unknown with unity as one (such as Darwin's single cell) will provide simple and reliable arithmetical compounding (such as Darwin's theory of evolution: going from simplecomplex; amoebamonkeyman) is an illusion that as yet pervades and debilitates elementary education.

229.06 Universe is the aggregate of eternal generalized principles whose nonunitarily conceptual scenario is unfoldingly manifest in a variety of special cases in local time-space transformative evolutionary events. Humans are each a special-case unfoldment integrity of the complex aggregate of abstract weightless omni- interaccommodative maximally synergetic non-sensorial Universe of eternal timeless principles. Humanity being a macromicro Universe, unfolding eventuation is physically irreversible yet eternally integrated with Universe. Humanity cannot shrink and return into the womb and revert to as yet unfertilized ova.

308.00 Universe is finite because it is the sum total of finitely furnished experiences. The comprehensive set of all experiences synergetically constituting Universe discloses an astronomically numbered variety of subset event-frequency rates and their respective rates of conceptual tunability comprehension. It takes entirely different lengths of time to remember to "look up" different names or facts of past events. Universe, like the dictionary, though integral, is ipso facto nonsimultaneously recollectable; therefore, as with the set of all the words in the dictionary, it is nonsimultaneously reviewable, ergo, is synergetically incomprehensible, as of any one moment, yet is progressively revealing.
 

In reading Synergetics, it becomes abundantly clear where the Wachowski brothers got the speech mannerisms for the Architect.

Sometimes you read this and think that Buckminster Fuller was a genius and cometimes you just think that he really liked tetrahedrons more than is entirely appropriate.

Didier Sornette at TED: Predicting Financial Crashes, Dragon Kings

Links for Later 4-11-13

1. Is grad school a cult? “In academia, perseverance is redefined as the ability to suffer silently or to survive on family wealth.”
2. CISPA is an idiotic intrusion on your privacy by people who have no idea about technology or civil rights.
3. Scott Turow also seems to have no idea about technology in publishing or the true scope of property rights.
4. Ten websites that will get you started on coding.
5. The real pivot.
6. Time series in big data.
7. Why funding science is always a good idea.

Links for Later 11-28-12

1. Kill Math (via @kortina)
2. Mother Jones profile of Harper Reed
3. Data Analysis Class Notes

Links for Later 10-23-12

1. How to make xkcd-style graphs using R, javascript or python.
2. How to save your kindle books from being deleted by Amazon.
3. How Intrade manipulation provides a positive return to smart investors.

Dots

Vi Hart talks about what do do in math class when you're not learning how to graph parabolas, why learning how to think is harder, yet more important than learning what to think, and why cardioids are cool.

(recommended to me by Carol Schumacher)

Links for Later 10-21-11

1. Edward Luttwak on geopolitical strategy and the implications of scotch prices in Tehran
2. Henry Rollins interview
3. Cantillation
4. Cantellation
5. Steve Yegge talks about how to present to Jim Bezos or other "hyperintelligent aliens"

Links for Later

1. Is the proposition P=NP necessary for market efficiency, and vice versa?
2. Is Bruce Schneier a powerful telepath who has mind controlled the TSA?
3. What do the cards hold for Alex Chee?
4. How should we pick strong passwords?
5. What do we need to do to maximize growth? (via marginal revolution)

Weird Algo

Last night, someone's trading system reversed the buy/sell signals in the natural gas market in a play to either a) trigger a shedload of limit orders in the market, b) generate increased volatility and/or c) screw with people's heads.

Zero Hedge's Tyler Durden has three articles up on this:

Yesterday, just after 8 pm Eastern we presented a very curious move in NatGas trading on the NYMEX when under very light volume, the NG performed something akin to a sine wave expansion, with about 12 peaks and troughs with ever increasing amplitude, until ultimately it triggered a major sell off when it appeared to touch off an avalanche of limit orders about 3% from the prevailing price, leading to an almost instantaneous 8% drop in Natgas which was promptly recovered. We dubbed this a fractal pattern, and after a follow up with the trade forensics experts at Nanex, it appears this was a very spot on designation, as zooming into the pattern indicates increasing levels of self-similarity and complexity. Yet aesthetic observations aside, this latest algo appears to be nothing more than a limit order-busting market manipulation device, whose sole purpose is to destabilize and generate volatility for the creator of the algo.

Take a look at the market graphs in the linked article(s). There are some weird people programming these things. That or we're seeing rogue AI's, and Skynet really did go live.

Links for Later

1. Urban legends of the 17th century
2. Vintage lesbians
3. Teach the Controversy T-shirts
4. Dealing with large data sets
5. Acid house comes to London
6. Umberto Eco on mad scientists and hollow Earths