Fall 2015 Computer Science 458 9/30/15

Announcements

• export DISPLAY - another try.

• Here is a draft list of sample final projects.

• Final projects are due the last day of reading period.

• Office hours. Ronghui Gu is holding office hours at 305 AKW.

  Wednesday 2-4 pm.
  Thursday 7-9 pm.
  

  Kun Run has office hours at 203 AWK.

  Monday 7-9 pm
  Friday 10am - 12pm
  

• Ronghui has created a class Piazza site for the course. You should have received an email on friday notifying you of your enrollment. This should facilitate communication. https://piazza.com/

• hw2: sensitivity function. Here is how it should work: You pass it a list of options, just as with decide. sensitivity then simulates ten different decisions by varying one of the five numeric assumptions either up or down. It applied a given variation to each option, and then runs decide on that new option pair. It might make sense for sensitivity first to call decide with no variation, to establish a base case.

  So you might have the following series of calls within sensitivity:

  1. decide(optOH, OptSC)
  2. decide(optOHlowcost, OptSClowcost)
  3. decide(optOHhighcost, OptSChighcost)
  4. decide(optOHlowdiscount, OptSClowdiscount)
  5. decide(optOHlowcostpercar, OptSClowcostpercar)
  6. usw. (etc.)

  This is a first level approach. You could add more sophistication by calculating the correlations among the variations. You could also include the probabilities of each scenario and then calculate an expected value for all possibilities, if that makes sense.

  Finally, you need to be prepared to take handle other options, besides the ones specified. For example, you could have two Ohio plant options, one of which is the given one, and another with a lower cost factory that produces fewer cars.

• Guest Speaker for Monday: John Niccolai, Citadel.

  Citadel Recruiting contact: Liz Ori (Elizabeth.Ori@citadel.com), Campus Recruiting team. She has been notified by John to expect to hear from you.

  As much as I tried to prepare you, John nevertheless used terms that I had failed to cover. Here are some that I noticed.

  • Multi Strategy Funds
  • G10
  • On-the-run / off-the-run
  • Basis point / bps / bips (beat the benchmark, haircut)
  • IRS interest rate swap market, e.g., mortgages
  • arbitrage
  • BRICs
  • EURUSD - exchange rates, FX. See http://www.x-rates.com/
  • Black-Scholes
  • Exchanges: CME
  • LIBOR - London Interbank Overnight Rate
  • Bonds: TIPS, TBA, On-the-run 10y
  • OTC - derivatives market
  • Transparency: Exchange > Securities < OTC
  • Sharpe Ratio
  • PnL - Profit and Loss
  • IRS swap has 200 fields
  • Notional Value
  • bullet / vanilla swap (Zero Present Value)
  • Fed funds rate is a step function
  • OIS - overnight index swap
  • Monte Carlo
  • [Black Swans]
  • CAD swaps dataq is unreliable
  • Capacity - can have a great strategy (Sharpe > 40) that does not scale.
  • Spectrum of automation: Macro < Model Informed < Model Driven < Algorithmic < HFT
  • Languages used at Citadel: C++, Python, C#, Excel.

Discussion

• See R package: stockPortfolio

• Example code

• Modern Portfolio Theory Continue with CAPM.

  Answers to exercies have been posted.

• Expert Systems