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1/ Financial Hacking: Evaluate Risks, Price Derivatives, Structure Trades, And Build Your Intuition Quickly And Easily (Philip Maymin)
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"To those new to the field, 'financial engineering' conveys a precision that is absent in the real world."
https://www.amazon.com/Financial-Hacking-Derivatives-Structure-Intuition-ebook/dp/B009OY1MXC/
Thread
"To those new to the field, 'financial engineering' conveys a precision that is absent in the real world."
https://www.amazon.com/Financial-Hacking-Derivatives-Structure-Intuition-ebook/dp/B009OY1MXC/
2/ "You may be asked to define risk: “Risk is uncertainty about the future.”
"This is a silly answer. For one thing, if your electricity fails, and you do not see market data, then you also have exposure to market movements occurring in the past, not just the future."
"This is a silly answer. For one thing, if your electricity fails, and you do not see market data, then you also have exposure to market movements occurring in the past, not just the future."
2/ "I don't think there is a good definition of risk. Ultimately, risk is just the set of your unhedged exposures, including ones you don't know about.
"If you are asked at an interview, start first with what they want to hear; then you can discuss the more intricate details."
"If you are asked at an interview, start first with what they want to hear; then you can discuss the more intricate details."
3/ "This holds as a life lesson too: when people ask you questions expecting to hear a particular answer, they won't listen to what you are saying until you first speak the magic words their brains are tuned in to.
4/ "So what if risk isn't easily defined? Biology is the study of life; life does not have a perfect definition. Physics is the study of matter; matter does not have a perfect definition.
"Finance is the study of risk, even though risk does not have a perfect definition."
"Finance is the study of risk, even though risk does not have a perfect definition."
5/ "Through securities, derivatives, and contracts, finance reallocates risk in exchange for money.
"Philosophy aside, we need to manage risk in the real world. If we don't do it, someone else will, and they may not do as good a job."
"Philosophy aside, we need to manage risk in the real world. If we don't do it, someone else will, and they may not do as good a job."
6/ "Having objective regulations means the regulator can and will be gamed. It can be shown that any regulation of risk will always result in greater systemic risk.
"I'd sift thousands of assets until I found one that looks better under your requirements than my own judgment.
"I'd sift thousands of assets until I found one that looks better under your requirements than my own judgment.
7/ "I'll just sort them all, maybe take the second best one to throw off suspicion, weave you a tale of excellent fundamentals and growth potential, and end up with an over-sized and under-risked investment."
8/ "If you have $100 of IBM supported by $16 of your own money, you have a 16% haircut.
"Haircut (vs. 'gearing' or 'leverage') can clearly express any arbitrary number without requiring an integer amount, cannot be misinterpreted, and has less room for unintentional confusion."
"Haircut (vs. 'gearing' or 'leverage') can clearly express any arbitrary number without requiring an integer amount, cannot be misinterpreted, and has less room for unintentional confusion."
9/ "Even the slightest amount of “hair” will mess up a pure arbitrage trade.
"The real hair is if one of your counterparties fails, or the laws or regulations change, or something unforeseen happens to wreck the deal. You're not safe until you have the profit as cash in hand."
"The real hair is if one of your counterparties fails, or the laws or regulations change, or something unforeseen happens to wreck the deal. You're not safe until you have the profit as cash in hand."
