Company Finance Risk Management
This is what I wrote to new contacts I made at the London Investor Show which I attended and presented at final Friday.
So, the scene is set. A single issue is for certain: if the future of banking is going to be digital, we want it to be populated with these who worth the deeper tenets of open source philosophy Otherwise we could be left with increasingly alienating, exclusive and unaccountable economic surveillance states, presiding more than increasingly passive and patronised users.
This is what DSGE models are supposed to do. This is why academic macroeconomists use these models. So why does not anybody in the finance market use them? Possibly sector is just slow to catch on. But with so many billions upon billions of dollars on the line, and so several DSGE models to pick from, you would consider someone at some large bank or macro hedge fund somewhere would be running a DSGE model. And but right after asking around quite extensively, I cannot uncover anyone who is.
And this is exactly where we see the changing conception of the robotic system’s ‘body’. Rather than becoming a mechanical assemblage with an algorithmic ‘mind’, the robot could be an algorithmic mind co-ordinating a ‘body’ constituted out of ordinary workers, who increasingly act like machine components. Believe about the Amazon deliveryman driving the van to act out an order sent to him by an algorithm. This ‘body’ does not even have to be constituted by the company’s own staff, as in the case of self-employed Uber drivers co-ordinated by the Uber algorithms.
So, its the directionality of price tag movements which has really tiny predictability, whereas the magnitude of modifications follows a procedure with a lot far more intriguing structure. It is in the record of this volatility that one particular sees potentially deep hyperlinks to other physical processes, such as earthquakes. A especially intriguing paper is this a single , again by the Boston group, quantifying many techniques in which marketplace volatility obeys many quantitative laws identified from earthquake science, specifically the Omori Law describing how the probability of aftershocks decays following a main earthquake. This probability decays really merely in proportion to 1/time because the main quake, meaning that aftershocks are most likely right away afterward, and grow to be progressively less probably with time. Episodes of high volatility appear to adhere to equivalent behaviour fairly closely.