Coin tossing

Coin tossing is probably one of the most well known random process. Everyone at some point in their life would have tossed a coin to aid some kind of decision. If a fair coin is tossed nine (9) times and all of them turn out to be Heads. What do you expect the chance of the tenth toss to be a Head?

50/50 seems to be a popular answer. I am more inclined to believe that the 10th toss would be a Tail because the coin is probably not "fair" as we were told and so we could be looking at an outlier.

Summary of September, 2010

I finished write up a manuscript based on readings I have done in the last few months.  The tentative title is called "Towards an organic view of risk management".  The term "organic" has nothing to do with molecular biology  (no DNA is involved).  It is used to distinguish a view of financial risk that is different from the traditional Cartesian view and how it is related to robust financial risk management. This is going to be an on-going work that I envision would take longer term to mature.  (I think of this work as a highly speculative but high return kind of investment.)  This would be something I would continue to rethink and verify on a regular basis.

For October, I plan to start working on business valuation on some public companies on TSX and publish some research summaries based on readings in Quant literature.  I would aim for weekly update on this blog.

I have been mentoring two students in the past.  Both of them are expected to graduate this coming year.  One of them would be heading to Vancouver Filming School to pursue a career in stage and prop design.  The other student had an interview with Microsoft this week for a software development position (and it looks like the interviewer likes him). The young mind is a wonderful thing. They often appear as immature and fragile. But once you nurture and fuel them with hope and confident, they would blossom into a beautiful thing.

The Dangers of Lying to Oneself

Here is an interesting blog entry written by Danny Choo, an entrepreneur and a popular figure relating to Japanese culture via the Web.  The article is best summarized by Danny himself:

To summarize, folks in the Comfort Zone lie to themselves to make them feel better about their situation. Steady income to fulfill the basic human needs is indeed important but there is something more important in life - to seek and live ones passion. Many folks in the Comfort Zone know what their passion is but end up not living it - until its too late. Continuing to lie to oneself will mean that you end up becoming the person that you didn't want to become.

Trust is an important thing in life.  In the article, Danny trusted and defended a former employee of his company, but ended up being betrayed by this employee and Danny woke up to realize that one bad apple has been spoiling the whole basket (his whole team).

This article echoes me in many ways.  At some point, you begin to wonder if what you have been doing could make you into a person you don't want to become.  At the same time, it becomes more difficult for people to trust each other.  Sometimes I wonder if having more knowledge have anything to do with trusting people and self realization.

BNN Interview of Nassim Taleb

An interview with Nassim Taleb will be aired tomorrow (Friday) at 5PM EST on BNN.

"Hindsight may be 20/20 but foresight is blind. Nassim Taleb, author of The Black Swan talks to SqueezePlay about the unpredictability of market shocks and the challenges of managing risk."

Nine years ago, an event happened in New York that changed the world we knew it.  9/11 is an example of The Black Swan (TBS) event.

About Gradation

I started this blog to keep track of research progress relating to "TBS" (The Black Swan) pioneered by Nissam N. Taleb and how the idea can be applied to quantitative analysis and risk management.  This blog is intended to readers who have interested in the TBS concept and have some knowledge in finance, risk management and quantitative analysis.  Readers who have interest in understanding randomness in complex systems may also find some materials useful.

For the curious readers, Gradating, or to gradate [grey-deyt], could mean,

1. to pass by gradual or imperceptible degrees, as one color into another, or
2. to gradate in color, a gradual change between hues, tones, or shades, or
3. any process or change taking place through a series of stages, by degrees, or in a gradual manner.

I always see the creation of this site as the summation of many influences in the past few years.  Through chance, I was introduced to the book The Black Swan: The Impact of the Highly Improbable.  This book is a valuable source to me because it helps to bring many lessons I learned into a cohesive whole.  My interest involves searching for ways to unlock synergy between risk management and robust system design using TBS concept, and to better understand the role of randomness in life.  This blog helps me to organize my thoughts and experiments some ideas with others.