While expected, the news still struck like a thunderbolt when the parting of the greatest innovator of our time was materialized on October 5, 2011.
Two years ago, a young Chinese was seeking funding for his keyboard through LinkedIn. The first impression I got instantly with his sleek design was: “Wow! This is Apple type product and the concept was generated by a Chinese.” Even though I had no clue whether his idea could be realized from technical perspective, I still spent lengthy time talking to him and offering advice in terms of financing from the other end of the planet. The guy disappeared from my life shortly after. But one of his words has always been lingering in my head: “I want to be a Chinese Steve Jobs.“
Frankly speaking, I was never a big fan of Apple. After I first got in touch with Macintosh many years ago, Apple had gradually phased out of my memory. When Apple was struggling with waves of bad news, I was busy immersing in the Windows world. Even with Steve Jobs’ return and subsequent launch of one cool new product after another, I was still stubbornly loyal to Microsoft and Blackberry for quite a number of years. Last year I could no longer resist the temptation and replaced my old gadget with MacBook Air, inevitably leading to a full surrender to other “I” products in six months. Like many others, I have finally fallen under the magic spell of Apple and its co-founder.
Despite his egomaniacal personality and close to totalitarian management style, Steve’s speech “Stay Hungry, Stay Foolish” delivered at the Commencement Ceremony of Stanford University in 2005 was so captivating and inspiring, needless to say the enormity of his contribution to the tech world and impact on everyone’s life. If Daniel Boorstin were able to rewrite his Knowledge Trilogy, Steve Jobs would undoubtedly have occupied an important chapter in each of his three books: the Discoverer of technology and business convention that have revolutionized computer/consumer electronics, music and movie industry; the Creator of artistry and fashion in seemingly boring technology that has rocked the popular culture; the Seeker of simplicity and perfection without the compromise of sophistication in product design coupled with theatricality in product presentation that has always carried an aura of mystery yet irresistible conviction.
Now it seems no more surprising that IPhone 4S instead of IPhone 5 was released the day before the man took his permanent leave of absence. It is a dedication to a Visionary and Genius of Our Time: IPhone for Steve!
May His Soul Rest in Peace!
Thursday, October 6, 2011
Tuesday, October 4, 2011
Mark to Market
I stared at a macro formula embedded in this massive Excel spreadsheet with $32B debt financing portfolio. This was the only piece that had stopped me from understanding the flow through the whole spreadsheet. After I googled for half an hour, I was still not completely sure. Without hesitation, I placed a call to Richie.
"Cubic Spline is a non-linear function with at least two known points on the curve to determine the 3rd one. It is normally used in the yield curve of fixed income..." Richie explained the concept clearly within a minute.
"Now I understand why they built this macro in. Wow, math genius! No wonder you have so many degrees." I exclaimed.
"Yeah, that translates to a half-idiot by your standard!" he retorted.
"I am quite close, quite close." I replied jovially while putting down the headset.
I always believe that the number of degrees and/or professional designations is inversely related to how far you could go in career. High IQ is not necessarily transferrable in the development of excellent soft skills, which are key to advance careers in the corporate world. But I have to admit that there are exceptions. With 5 academic degrees and after teaching at the top university in China and Canada for more than half of his career, Richie has succeeded in moving up the corporate ladder and holds a very senior position in risk management at the largest bank in Canada. Like Richie, there are a handful of senior professionals nicknamed as "the quants" from mainland China active in the risk management field on Bay Street in Toronto, equivalent to Wall Street in New York. Probably and arguably the most famous one is Dr. David X Li, an original Bay Street export to Wall Street.
Educated in China and trained academically and professionally in Canada, Dr. Li pioneered Gaussian Copula model for the pricing of collateralized debt obligations (CDOs) in early 2000s in US. With its simplicity and ease for understanding, the model had since been frequently used to value CDOs for a wide range of investment vehicles previously deemed too complex to price until the collapse of financial services industry in late 2008, after which time the formula has been labelled as "recipe for disaster”. Maybe Dr. Li sensed the danger inherent in the system he had helped establish. By 2005, Dr. Li was among those warning about the limitations of his model. "The most dangerous part is when people believe everything coming out of (the model)," he told The Wall Street Journal once. He also wrote: “The current copula framework gains its popularity owing to its simplicity. However, there is little theoretical justification of the current framework from financial economics. We essentially have a credit portfolio model without solid credit portfolio theory.”
I only came to know Dr. Li's name when Richie, who is Dr. Li's good buddy at the University of Waterloo and ex-coworker at the bank, sent us an article titled "The Formula that Felled Wall St." published at the height of the financial crisis by Financial Times. The article instantly generated heated exchange of emails amongst ourselves. The theme was obviously focused on whether Dr. Li shall be blamed for the crisis. The argument finally came to a pause with a conclusive email from Yong, another Bay Street legend.
“David Li didn't blow up Wall Street, but certainly supplied the matches. David had laid a foundation for Copula framework. His original idea was quite innocent. The market has gone way too far after his publication. What a world, a mathematician can be so "dangerous"! The total loss of this financial crisis is over 10 trillions, which has exceeded the total damage of the first and second world war.”
While I was drafting my evaluation report of the debt financing, my mind could not help wandering. In accounting, financial instruments are usually calculated at market (fair) value, which is termed as “mark to market”. Remembering several minor tricks I made in pricing stock options before, I chuckled at the thought of Richie’s famous yet ironic comments:
”Mark to market, I would rather call it mark to model.”
If there is absolutely real objectivity, the world would have become a much less “exciting” place, wouldn’t it?
"Cubic Spline is a non-linear function with at least two known points on the curve to determine the 3rd one. It is normally used in the yield curve of fixed income..." Richie explained the concept clearly within a minute.
"Now I understand why they built this macro in. Wow, math genius! No wonder you have so many degrees." I exclaimed.
"Yeah, that translates to a half-idiot by your standard!" he retorted.
"I am quite close, quite close." I replied jovially while putting down the headset.
I always believe that the number of degrees and/or professional designations is inversely related to how far you could go in career. High IQ is not necessarily transferrable in the development of excellent soft skills, which are key to advance careers in the corporate world. But I have to admit that there are exceptions. With 5 academic degrees and after teaching at the top university in China and Canada for more than half of his career, Richie has succeeded in moving up the corporate ladder and holds a very senior position in risk management at the largest bank in Canada. Like Richie, there are a handful of senior professionals nicknamed as "the quants" from mainland China active in the risk management field on Bay Street in Toronto, equivalent to Wall Street in New York. Probably and arguably the most famous one is Dr. David X Li, an original Bay Street export to Wall Street.
Educated in China and trained academically and professionally in Canada, Dr. Li pioneered Gaussian Copula model for the pricing of collateralized debt obligations (CDOs) in early 2000s in US. With its simplicity and ease for understanding, the model had since been frequently used to value CDOs for a wide range of investment vehicles previously deemed too complex to price until the collapse of financial services industry in late 2008, after which time the formula has been labelled as "recipe for disaster”. Maybe Dr. Li sensed the danger inherent in the system he had helped establish. By 2005, Dr. Li was among those warning about the limitations of his model. "The most dangerous part is when people believe everything coming out of (the model)," he told The Wall Street Journal once. He also wrote: “The current copula framework gains its popularity owing to its simplicity. However, there is little theoretical justification of the current framework from financial economics. We essentially have a credit portfolio model without solid credit portfolio theory.”
I only came to know Dr. Li's name when Richie, who is Dr. Li's good buddy at the University of Waterloo and ex-coworker at the bank, sent us an article titled "The Formula that Felled Wall St." published at the height of the financial crisis by Financial Times. The article instantly generated heated exchange of emails amongst ourselves. The theme was obviously focused on whether Dr. Li shall be blamed for the crisis. The argument finally came to a pause with a conclusive email from Yong, another Bay Street legend.
“David Li didn't blow up Wall Street, but certainly supplied the matches. David had laid a foundation for Copula framework. His original idea was quite innocent. The market has gone way too far after his publication. What a world, a mathematician can be so "dangerous"! The total loss of this financial crisis is over 10 trillions, which has exceeded the total damage of the first and second world war.”
While I was drafting my evaluation report of the debt financing, my mind could not help wandering. In accounting, financial instruments are usually calculated at market (fair) value, which is termed as “mark to market”. Remembering several minor tricks I made in pricing stock options before, I chuckled at the thought of Richie’s famous yet ironic comments:
”Mark to market, I would rather call it mark to model.”
If there is absolutely real objectivity, the world would have become a much less “exciting” place, wouldn’t it?
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