Financial models need more complexity?

A post over at the New York Times is arguing that one of the main causes of the financial crisis was inadequate quantitative models – models that tended to understate risk because they failed to provide a realistic model of the way the world works – neither incorporating risks such as a failure of liquidity, nor the complexities of human behaviour.

I certainly agree that the current stable of models which are in widespread use are inadequate given that the competitive market has made the spreads on trades so tight that there is no longer any buffer to cover the many short-falls in the models. Back when vanilla options were an exotic trade, the trader would incorporate plenty of fat in their options trades. Intense competition, a market that has steadily grown over the past 20 years (notwithstanding small glitches), and increased familiarity with the trades has served to camouflage the risks the traders were running in their options books.

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Eclipse Phase RPG

I just read this awesome thread over at about character creation in the new RPG Eclipse Phase. Man, this RPG sounds awesome! As ExNihilo mentions in the thread:

The fact that a question like "Can my character upload his 
living consciousness into a distributed network-swarm of
microscopic robots?" results in actual debate is enough to
convince me that I'll like this game regardless of what the
answer itself turns out to be.

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Getting Postfix sending email on your Mac

I have recently been setting up my MacBook (running Leopard) to send email using the local email delivery system, i.e. Postfix. This means modifying the default installation to relay email through my ISP/email service – in my case; FastMail. I use FastMail because they have a nice secure email setup with both IMAP and SMTP access encrypted using SSL, but the instructions below will also work with Google Mail. The advantage of having your Apple Mac set up like this is that it enables command line scripts and various unix programs to send email. In my case, it allows me to use Mutt and Emacs as my email client.

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Blogging and SEO talk by Matt Cutts

Matt Cutts gave an extremely interesting and dynamic talk at WordCamp about blogging and Search Engine Optimization. Not only was it extremely entertaining, but it contained lots of interesting tidbits about how to increase the PageRank of your site.

Making your application viral

Daniel Tenner has written an interesting post on how to make you application viral.

The core model for viral growth is the following: viral coefficient = (average number of users invited by each active user) x (proportion of invited users that actually join or become active) x (proportion of such users that invite others). Daniel provides a checklist of techniques designed to optimize the viral coefficient. The general techniques are as follows:

  • Make inviting people a core part of the process.
  • Keep pulling people back in
  • Be useful even if there are no other friends using the application.
  • Remove artificial invitation limits.

Detroit – Ground Zero for Economic Collapse

Here is a video showing how badly Detroit has been affected by the collapsing housing market. Towards the end of the video you can see some amazing mansions in the worst-hit areas of Detroit that you can supposedly buy at a massive discount.