Simulating Soft Skills

Simulearn is a company that provides "soft skills" simulation software.

Clark Aldrich, who studied AI and cognitive science at Brown and developed the vLeader product, talks about "Simulations and the Future of Learning" with an emphasis on "kinesthetic content", well-understood by computer game makers.

He asks "How do you take leadership content and put it into a computer game format?" The task is to create a new genre. As we create more educational simulations, we need to create new genres.

Becoming Au Fait with the Bond Market

Looking for a bond trading system - why not check out BondDesk's offering? Before you do, though, it pays to know a little bit about bonds. The first thing to note is that there are multifarious ways of calculating a bond's yield.

Wealthy investors of yore (the primary investors in the bond market) would look for bonds with high credit quality and high coupons.

Coupons were quoted as yield, nowadays referred to as "nominal yield". (Example of this calculation: if a bond has par value of $1000, and pays $32.50 per 6months, its nominal yield is 6.5%). As an active secondary market developed for bonds in the late 19th and early 20th centuries, investors with a more "trader" mindset started to look at other measures to assess investments. Now they are not looking for bonds with high coupon rate per se, but looking for opportunity to make capital gains. In particular, how do you distinguish between a bond with high coupon rate trading above par, and a bond with low coupon rate trading below par. You need some concept of IRR of the bond to allow comparison. It's all about finding ways to buy low and sell high.

YTM is the IRR of the bond's dirty price including all scheduled coupon and principal payments. Before computers, this was hard to calculate, so another metric known as current yield became popular, defined as: (sum of coupons payable each year) / clean price.

If a bond is trading at par, nominal yield, current yield and yield to maturity are equal.

Government Technology

Read the latest on government technology (including Green IT!) on this magazine! The mag also has a link to an IT recruitment website.

Glencore

Glencore is a commodities trading company, dealing with producers and industrial consumers. They are a Swiss company employing over 2000 people globally. Founded in 1974, Glencore acquired a Dutch grain marketing company, creating an Agricultural Products group. Glencore holds a stake in UK company, XStrata PLC. Also own a 66% interest in Perubar, a Zinc/lead mine in Peru.

SAP makes "Carbon Impact"

SAP has unveiled "Carbon Impact" following its acquisition of Carbon Management software vendor, Clear Standards.

Library Services

Ok, ok it's not really financial technology here, but humour me. Dawsonera is one of a growing number of library services tech firms out there. They have a web-based reader portal where you can read books online from publishers like: Imperial College Press, McGraw Hill, Wiley, World Scientific and Cambridge University Press.

Bankruptcy Prediction Models

Edward Altman (professor of finance at Stern), in 1968, developed the Altman Z-Score to measure the "fiscal fitness" of a company. He used multiple discriminant analysis (MDA) - aka Discriminant Factor Analysis - a close relative of PCA. PCA and MDA are maximising mathematically different things. A keyword in both systems is eigenreduction. Discriminant analysis is used in classification problems; here's the corresponding Matlab function.

Altman designed the formula for manufacturing companies with assets of more than $1m.

Exotics Derivatives Blog

A neat blog on exotics derivatives trading can be found here.

Also, check out this quiz, called "Are you smarter than a Goldman Sachs trader?" Warning: you need to be totally at ease with swaptions, variance swaps and their relationship with realized vol, key properties of dark pools and the Ohrnstein-Uhlenbeck process.

Finding the Fifteen

“In the venture capital business, 15 companies a year still deliver 97 percent of returns. The key to success is still finding those 15.” - Ben Horowitz

Marc Andreessen, founder of Netscape, has started a technology VC fund together with Ben Horowitz. The firm, Andreessen Horowitz, will raise sums as small as $50K to wager on small tech businesses. The NY has reported the firm has raised a pool of $300m. Businesses that show promise will then be eligible for a second round of funding to enable them to grow globally. This is a really exciting idea; certainly there will be a lot of failures, but at least the cost of failure is kept controlled. Marc's gameplan is to look for companies "like Facebook", of which he is a director. FB started with $500K but since raised $600m to grow.

Hammer Time: Optiver's Oil Trading Software

Amsterdam-based options market making enterprise, Optiver, has a superfast oil trading software, called Hammer (reported by the NY Times). The CFTC believes Optiver has been manipulating the price of oil. Transcripts and taped conversations reportedly described traders talking about their activities as "whacking" and "bullying up" the price of oil. Commodities is 10% of Optiver's business, 65% is derivatives, 25% equities.

Regulators are wondering how prop trading and market making can coexist. Are the two inseparable? Tanno Massar, PR exec for Optiver, explained that there was no inherent conflict between making markets and pursuing profits, indeed, why would markets be made if profits could not be sought? Who would make the market then, the government? Supranationals?

The Chief Regulator of NYMEX, Thomas LaSala, reprimanded Optiver: "the market seems to move in reaction to your orders". The US has led Europe in high-frequency trading, but Getco and Madison Tyler have worked to fill that gap.