Archive for February, 2008

Lectures on the Volatility Smile

February 28, 2008

Edward Derman of My Life as a Quant fame is teaching a class on quantitative derivative pricing. He is placing his lecture notes on-line. The central topic seems to be the volatility smile.


Currency Trading Benchmarks

February 21, 2008

A new paper by Levich and Pojarliev shows that most of the apparent superior returns by active currency traders can be replicated by mechanical strategies. This resembles research in active mutual funds, which shows that most superior performance versus the market disappears once you control for mechanical strategies such as momentum.

Hoax Analyst Conference Calls

February 19, 2008

Here’s a strange story from the Wall Street Journal. Someone has been passing themselves off as an analyst at the quarterly conference calls. He calls in pretending to a well-known analyst, but when he’s given a chance to ask a question, he announces himself as Joe Herrick of Gutterman Research.  (There is no evidence that either Herrick or Gutterman Research really exist.)  Whenever called upon, they ask detailed questions full of corporate buzzwords such as Six Sigma. It’s not really clear if the questions make any sense, or what purpose they serve.  The whole thing is quite bizarre.

Death of a Data Website

February 16, 2008

I’m in the middle of collecting data for a project that I’m working on. I came across Economic Indicators .GOV, a US government website that gathers together the leading economic indicators for the state of the economy. The sad news is that the site is being discontinued on March 1, 2008 because of budget cuts.

US Government Blog

February 15, 2008

The internet has gone too far. The US government has a home page. On that home page, the US government has its own blog.

Economics Data Sources

February 14, 2008

The University of Michigan has a very nice webpage listing various economics data sources, many of them free.

Mortgage Defaults and Housing Prices

February 12, 2008

Richard Green at Richard’s Real Estate and Urban Economics Blog argues that everything we know about the subprime mortgages is wrong. The historical evidence is that while falling housing prices increase the number of mortgages in default, that an exogenous increase in mortgage defaults does not lead to falling house prices.

Hostile Takeover Example

February 7, 2008

The recent bid by Microsoft for Yahoo is an excellent example to prompt class discussion on hostile takeovers.  One of my students raised it in class after the class discussed the proxy fight example I highlighted in an earlier post.

Payday Lending

February 4, 2008

By an eerie coincidence (we’re both reading a paper right now about payday lending), I came across this post at Credit Slips on the topic. It mentions two other papers on the topic, one by Morgan and Strain that shows that after Georgia outlawed payday lending, the state’s rates of bounced checks and Chapter 7 bankruptcy increases. The University of North Carolina did an actual survey of North Carolina’s low- and middle-income residents after North Carolina abolished payday lending, and the vast majority had a negative opinions of the practice. Twice as many former payday borrowers felt that payday lending had a negative impact on their lives than did positive.

Tracking Errors in ETFs

February 3, 2008

Holden Redbone at Hedgefinger find several ETFs with tracking errors of 2.7 to 4.7 percent.

Via Market Movers.