Posts filed under “Mathematics”

Nassim Taleb’s Keynote at The Big Picture Conference

Nassim Taleb is going to open The Big Picture Conference: Capitalism After Crisis with his vision of what went wrong with the financial system and what needs to be done to create a new one that is no longer fragile and subject to the kind of shock we’re still living through.

Capitalism 2.0: Building a Robust Economic System will outline Taleb’s vision of why the highly efficient world financial system is already a form of leverage that makes debt leverage for speculation so dangerous.

To join Nassim Taleb, author of The Black Swan, and gain his insight into the future of the world economy and the role of markets within it, register for the The Big Picture Conference here.

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The Big Picture Conference: Capitalism after Crisis
A look at Banking, Hedge Funds, and Media during the Recession…and Beyond
June 3, 2009 – New York Athletic Club

Limited Space Available, Register Now

Category: Bailouts, Markets, Mathematics

How to Black Swan-proof the World

Nassim Taleb suggests ways to make economic life closer to our biological environment: smaller companies, richer ecology, no leverage. The risk takers of the economy should be entrepreneurs, not bankers; Companies shouls be born and die every day, without making the news. In other words, a place more resistant to black swans. Ten principles for…Read More

Category: Derivatives, Mathematics

Numbers, Damn Lies & Statistics

Fascinating discussion on how basic math discussions have been bastardized: “Numbers lack warmth. Cold as last year’s love, they sit counting their fingers. Think of numbers and what do you see? Dust and ledgers and the yellow fingers of a parched accountant. No longer. Numbers have had the mother of makeovers. No ordinary scrubbing up,…Read More

Category: Mathematics, Psychology

Billion vs Trillion

We previously looked at a Billion vs 1,000 Million; This is a nice example of relative size of numbers: > > via NYT

Category: Digital Media, Mathematics

Billion vs 1,000 Million

Wryly amusing: > > Hat tip Bradman! via XKCD

Category: Bailouts, Financial Press, Humor, Mathematics

Correlation

Some geek statistical humor: > > xkcd via Flowing Data

Category: Humor, Markets, Mathematics

QOTD: Statisticians are the New Sex Symbols

“I keep saying the sexy job in the next ten years will be statisticians. People think I’m joking, but who would’ve guessed that computer engineers would’ve been the sexy job of the 1990s?” -Hal Varian, The McKinsey Quarterly, January 2009 > Well, not quite sex symbols. But as Google’s chief economist (and former NYT columnist)…Read More

Category: Markets, Mathematics, Quantitative

Can Wall Street Do Basic Math?

That’s the question Bob Cringely asks.

Bob points out what might be an embarrassing error in a chart (below) — on the Banks/Financials no less — prepared by a JP Morgan Analyst:

It’s a chart showing the deterioration of major bank market caps since 2007.  Prepared by someone at JP Morgan based on data from Bloomberg, this chart flashed across Wall Street and the financial world a few days ago, filling thousands of e-mail in boxes.  Putting a face on the current banking crisis it really brought home to many people on Wall Street the critical position the financial industry finds itself in.

Too bad the chart is wrong.

It’s a simple error, really.  The bubbles are two-dimensional so they imply that the way to see change is by comparing AREAS of the bubbles.  But if you look at the numbers themselves you can see that’s not the case.

Take CitiGroup, for example.  The CITI market cap dropped from $255 billion to $19 billion — a difference of 13.4X.  If we’re really comparing the areas of the bubbles, that means 13.4 of those tiny CitiGroup-of-today bubbles should precisely fill the big CitiGroup-of-the-good-old-days bubble.  Only they won’t.  As a matter of fact it would take about 13.4 times as many little bubbles to fill the big bubble as the chart preparer thought or 179.64 little bubbles.  Pi r squared, remember?  This is because the intended comparison wasn’t two-dimensional but one-dimensional — the chart maker was intending we compare the DIAMETERS of the bubbles, not their areas.

My first read of this is that comparing height (i.e., bars rather than circles) would be accurate. Circles won’t work due to the squaring (π R squared) , where as diameters do not bring in a factorial change. That’s what creates the exponential rather than arithmetic change in the circle’s area.

I don’t have the original data, and I am wondering if this might be a simple Excel charting error [Update: Excel gives you the option of selecting Area or Diameter when choosing the circle chart as an option. I suspect this was a simple spreadsheet graphing error -- not a mathematics error -- but its embarrassing nonetheless]

If anyone has either the Market cap data handy, or wants to pull the teeny data from the chart onto a spread sheet, please email it to me at thebigpicture-at-optonline.net. Alternatively, if you can design a more informative/accurate graphic, please send that along . . .

UPDATE: 2/15/09 5:52pm

Several corrected versions of the original chart (below) follow . . .

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click for ginormous chart

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Read More

Category: Humor, Markets, Mathematics, Research, Valuation

Friday the 13th Black Swan

> What could be a more appropriate thing to do on Friday the 13th than have lunch with Fooled by Randomness and The Black Swan author Nassim Taleb? I am looking forward to an interesting meal . . . (apologies for the shameless name dropping) > UPDATE: February (Friday the) 13th, 2009 Fascinating lunch —…Read More

Category: Markets, Mathematics

Verizon Math Fail

Hysterical!

Category: Humor, Mathematics, Video