|A New Look at Risk Arbitrage
What is Risk Arbitrage? For many people in the finance industry, the concept of "risk arbitrage" refers to an investment strategy where an investor purchases shares of a stock in the hope that, due to a potential major short-term event, the stock price will significantly rise. These events can include imminent takeover actions or the prospect that a company's financial position will materially improve, [...]
|How Sandy Impacted the World's Markets - All in ONE plot.
Measuring the impact of a storm? How do you do that? One approach is to ask insurance companies to disclose the amounts claimed by those who have been damaged and had insurance. This can take months. But how about a different approach? The OntixTM Volatility Index - which provides a new means of measuring the combined volatility of markets seen as a single system - may be used to infer [...]
|Why Can't Huge Problems Be Solved (Anymore)?
Before you start to solve a problem (a numerical problem) you should check its conditioning. An ill-conditioned problem will produce very fragile and unreliable results - no matter how elegant and sophisticated solution you come up with it will be vulnerable. Think of a simple and basic problem, a linear system of equations: y = A x + b. If A is ill-conditioned, the solution will be very sensitive to [...]
|Supply and Demand: Does the Law Always Hold?
The laws of supply and demand are probably one of the most important concepts in economics. In essence, it explains the nature of the relationship between demand, supply and price. The law of supply, in particular, states that the higher the price, the higher the quantity supplied. In other words, the relationship has an upward slope. The laws of supply and demand, however, relate price to supply and demand when [...]