Financial Engineering

In addition to this blog I also run the Curious Cat Investing and Economics blog. Still I don’t really understand what financial engineering is. Here is an article from the author of an excellent economics blog – Reverse engineering financial engineering:

Call it the downside of complex financial engineering. That engineering took some risks off the banks balance sheet (literally in some cases), but it also means that no one quite knows where the subprime losses are. And there is a suspicion that some of those losses are hiding in funds that haven’t offered adequate compensation for the risk.

A few months ago a lot of subprime debt could be packaged into a security that was worth more than the sum of its parts (with a bit of help from the credit rating agencies. And this process was widely lauded. The IMF argued that the United States unique skill at creating innovative fixed income “product” was pulling in the capital needed to finance the US current account deficit. The Fed argued that financial innovation allowed the banks to sell risks that they previously might have held on their balance sheet — though it is also worth noting that the banks themselves were big buyers of MBS as well. Risks were divided and then sold to those best able to manage them.

I understand there has been a large move toward using highly complex math for financial strategies. I understand many derivatives and other investment vehicles have been created. I just don’t really get what makes some of it engineering. Creating new financial instruments, I can come close to understand the argument for calling that engineering but still… And I don’t understand why complex accounting often seems to be called engineering instead of accounting. And the portion that is mainly about changing legal classification then isn’t it more legal than engineering (it seems much financial engineering are gimmicks or tricks or… to gain favorable legal classification for tax… purposes).

Studying Martian Soil for Evidence of Microbial Life

Study: Martian soil may contain life

The search for life on Mars appeared to hit a dead end in 1976 when Viking landers touched down on the red planet and failed to detect biological activity. But Joop Houtkooper of the University of Giessen, Germany, said on Friday the spacecraft may in fact have found signs of a weird life form based on hydrogen peroxide on the subfreezing, arid Martian surface.

His analysis of one of the experiments carried out by the Viking spacecraft suggests that 0.1 percent of the Martian soil could be of biological origin. That is roughly comparable to biomass levels found in some Antarctic permafrost, home to a range of hardy bacteria and lichen. “It is interesting because one part per thousand is not a small amount,” Houtkooper said in a telephone interview.

“We will have to find confirmatory evidence and see what kind of microbes these are and whether they are related to terrestrial microbes. It is a possibility that life has been transported from Earth to Mars or vice versa a long time ago.”

Interesting, certainly far from convincing evidence but still fun speculation. Claim of Martian Life Called ‘Bogus’:

Norman Pace, a microbiologist at the University of Colorado, is skeptical of the new claims. “It sounds bogus to me,” Pace told SPACE.com. “I don’t consider the chemical results to be particularly credible in light of the harsh conditions that Mars offers.”

Lunar Landers X-Prize

Crash destroys rocket ahead of X Prize contest

The front-runner for a $2 million NASA competition to build mock lunar landers has lost one of its two main vehicles in a fiery crash. The company, Armadillo Aerospace, says it will enter a smaller vehicle instead, but outsiders say the upset will level the playing field and add suspense to the upcoming contest.
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The challenge has two ‘levels’ that involve a vehicle lifting off at one launch pad and hovering – for either 90 or 180 seconds, depending on the level – at an altitude of 50 metres as it moves to a second launch pad 100 metres away. Then the vehicle must do the same thing in reverse. If more than one vehicle achieves this, then the vehicle that can repeat it the greatest number of times in a given time period of time will win.
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He notes that the front-runner for the first solo, non-stop transatlantic flight of an aircraft in 1927 was not Charles Lindbergh but Richard Byrd, “until he crashed on take-off, and just like that, was out of the race.” That left Lindbergh to win the $25,000 prize for the flight.

The X prize contests continue to be an interesting method of encouraging research and development. Previous posts: $10 Million for Science Solutions – Autonomous Vehicle Technology Competition – Lunar Lander X-prize site

Vertical Rotation Personal Windmill

New wind turbine spins success for winning student

Ben Storan, a student graduating with an MA in Industrial Design Engineering from the Royal College of Art (RCA), has been working for the past year in conjunction with Imperial College to design an affordable personal wind turbine suited to the urban environment.

The result is a unique design which uses vertical, rather than traditional horizontal, rotation. This feature gives a slower rotational speed, which allows the turbine to capture more energy from turbulent air flow, common to urban environments. It also means quieter operation. As a result, it is able to generate more energy than domestic models currently on the market. Similarly sized existing personal wind turbines claim to generate 1kW at a wind speed of 12 m/s, but typically produce just 40% of what is claimed. Ben’s design should realistically produce 3 times that (1.2kW) of those currently on the market.

Sexy Math

Mean Girls:

British researchers, stated that men had 12.7 heterosexual partners in their lifetimes and women had 6.5.” These numbers, though Kolata doesn’t say so, are means, not medians. In this case, it’s indeed mathematically impossible that the numbers are correct. The medians in the British sample? Seven and four, same as in the American study—so you can stop worrying about a transatlantic promiscuity gap.

“It is logically impossible for heterosexual men to have more partners on average than heterosexual women,” she explains. “Those survey results cannot be correct.” Kolata even quotes a theorem to this effect, backed up by mathematician David Gale of Berkeley: The average number of partners has to be the same for men and women.

This article makes several good mathematical and scientific points, including the dangers of trusting reports by participants. Also I can see if this page is more popular than some of the other math posts. For awhile now I have noticed “sex 100” showing up as one of the terms guiding the most visitors to this site. I wondered what that could be – I just took a look: Bdelloid Rotifers Abandoned Sex 100 Million Years Ago. I think maybe those searchers didn’t exactly find what they wanted.

Mining the Moon

Mining the Moon by Mark Williams:

At the 21st century’s start, few would have predicted that by 2007, a second race for the moon would be under way. Yet the signs are that this is now the case. Furthermore, in today’s moon race, unlike the one that took place between the United States and the U.S.S.R. in the 1960s, a full roster of 21st-century global powers, including China and India, are competing.

Even more surprising is that one reason for much of the interest appears to be plans to mine helium-3–purportedly an ideal fuel for fusion reactors but almost unavailable on Earth–from the moon’s surface
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But a serious critic has charged that in reality, He3-based fusion isn’t even a feasible option. In the August issue of Physics World, theoretical physicist Frank Close, at Oxford in the UK, has published an article called “Fears Over Factoids” in which, among other things, he summarizes some claims of the “helium aficionados,” then dismisses those claims as essentially fantasy.

As I stated in January in Helium-3 Fusion Reactor: “This sounds pretty incredible to me and I find the claims of using fuel from the Moon economically to power our needs on Earth. Still it is interesting and just because it sounds fantastic does not mean it can’t be true. But I am skeptical.”

Revolving Doors

Every day I go into work I see about 15 people by bypass a revolving door (those using the revolving door average about 1.5 – including me) and use a standard door (and in fact 90% of those use an automatic handicap door open button – which leaves the door open for a good 5-10 seconds). MIT students have a page about the waste caused by people too lazy to use a revolving door:

On average 8x as much air is exchanged when a swing door is opened as opposed to a revolving door. That’s 8x as much new air that needs to be heated or cooled and that’s why using the revolving door is a great way to reduce energy requirements on campus.
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You’ve probably seen the signs around campus saying “Help MIT save energy. Please use the revolving door.” But does it really make any difference? Absolutely. Our estimates show that if everyone used the revolving doors at E25 alone, MIT would save almost $7500 in natural gas amounting to nearly 15 tons of CO2. And that’s just from two of the 29 revolving doors on campus!

As noted previously, for energy savings (greenhouse gas reduction…), not-so-glamorous conservation works best.

Textbook Revolution

Textbook Revolution is a resource on free textbooks and free related course materials. In general, I must say the prices of textbooks seem crazy. This is another tool great open access resource.

At Textbook Revolution, you’ll find links to textbooks and select educational resources of all kinds. Some of the books are PDF files, others are viewable only online as e-books. Most books are aimed at undergraduates, but there are at least a few resources at every level, from kindergarten to post-doc. All of the books are offered for free by their respective copyright holders for online viewing. Beyond that, each book is as individual as the author behind it.

Some examples: The Scientist and Engineer’s Guide to Digital Signal Processing by Steven W. Smith; Light and Matter by Benjamin Crowell; A First Course in Linear Algebra by Robert A Beeze; Programming Ruby: The Pragmatic Programmer’s Guide by
Dave Thomas and Introduction to Statistical Thought by Michael Lavine.

While on the subject of textbooks, I will plug my father’s book: Statistics for Experimenters – it is my blog so I get to do what I want 🙂

Brain Drain Benefits to the USA Less Than They Could Be

Study Points to ‘Brain-Drain’ of Skilled U.S. Immigrant Entrepreneurs to Home Countries. I am not totally sure reverse brain drain is the proper term. It appears to me this is really saying the size of the brain drain, coming to the USA, is less than it could be (many brains that came are returning). Yes in some senses it is a brain drain from the USA but still…

In this study, “Intellectual Property, the Immigration Backlog, and a Reverse Brain-Drain,” researchers offer a more refined measure of this rise in contributions of foreign nationals to U.S. intellectual property and analyze the possible impact of the immigrant-visa backlog for skilled workers. The key finding from this research is that the number of skilled workers waiting for visas is significantly larger than the number that can be admitted to the United States. This imbalance creates the potential for a sizeable reverse brain-drain from the U.S. to the skilled workers’ home countries.

“These findings are important, highlighting the invaluable contribution of foreign nationals to our country’s technological and economic vitality,” said Duke Provost Peter Lange, the university’s top academic officer. “We know from our own experience here that students from China, India and other nations can play an outstanding role in advancing knowledge and creating new jobs, especially in cutting-edge fields.”

I don’t think this result is going to decrease. And I believe the actual loss of scientists, engineers and entrepreneurs born in the USA for significant portions of their careers to other countries will increase dramatically over the next 25 years. I agree that it is in the interests of the USA to try and retain the ‘Brain Drain’ advantages it has been receiving.

Regular Aerobic Exercise for a Faster Brain

Lobes of Steel

Scientists have suspected for decades that exercise, particularly regular aerobic exercise, can affect the brain. But they could only speculate as to how. Now an expanding body of research shows that exercise can improve the performance of the brain by boosting memory and cognitive processing speed. Exercise can, in fact, create a stronger, faster brain.
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But something else happened as a result of all those workouts: blood flowed at a much higher volume to a part of the brain responsible for neurogenesis. Functional M.R.I.’s showed that a portion of each person’s hippocampus received almost twice the blood volume as it did before. Scientists suspect that the blood pumping into that part of the brain was helping to produce fresh neurons.

The hippocampus plays a large role in how mammals create and process memories; it also plays a role in cognition. If your hippocampus is damaged, you most likely have trouble learning facts and forming new memories. Age plays a factor, too. As you get older, your brain gets smaller, and one of the areas most prone to this shrinkage is the hippocampus. (This can start depressingly early, in your 30’s.) Many neurologists believe that the loss of neurons in the hippocampus may be a primary cause of the cognitive decay associated with aging.