Some time ago I conducted a poll on LinkedIn that quickly went viral. I asked which of three different coin tossing sequences were more likely and I received exactly 1,592 votes! Nearly 48,000 people viewed it and more than 80 comments are under the post (you need a LinkedIn account to fully see ... [Read more...]

In 2018 the renowned scientific journal science broke a story that researchers had re-engineered the commercial criminal risk assessment software COMPAS with a simple logistic regression (Science: The accuracy, fairness, and limits of predicting recidivism). According to this article, COMPAS uses 137 features, the authors just used two. In this post, I ... [Read more...]

We have already covered the backtesting of trading strategies in this blog (see Backtest Trading Strategies Like a Real Quant), so let us up the ante: if you want to learn how to backtest options strategies, read on! Options trading strategies are strategies where you combine, often several, derivatives instruments ... [Read more...]

Wikipedia defines Parrondo’s paradox in game theory as A combination of losing strategies becomes a winning strategy. If you want to learn more about this fascinating topic and see an application in finance, read on! Please have a look at this wonderful little video by my colleague Professor Humberto ... [Read more...]

In data science, we try to find, sometimes well-hidden, patterns (= signal) in often seemingly random data (= noise). Pseudo-Random Number Generators (PRNG) try to do the opposite: hiding a deterministic data generating process (= signal) by making it look like randomness (= noise). If you want to understand some basics behind the scenes ... [Read more...]

During our little break, Valentine’s Day was celebrated. Yet for many, it was a depressing day because they are single and are looking for love. Speed dating is a popular format (in times of Covid-19 also in virtual form) to meet many different potential soul mates in a short ... [Read more...]

When you ask successful people for their advice on how to become successful you will often hear that you have to take risks, often huge risks. In this post we will examine whether this is good advice with a simple multi-agent simulation, so read on! The following quotes from Dan ... [Read more...]

The German news magazine DER SPIEGEL has a regular puzzle section in its online version, called “Rätsel der Woche” (“Riddle of the Week”). Some of those puzzles are quite interesting but I am often too lazy to solve them analytically. So I often kill two birds with one stone: ... [Read more...]

More and more companies use chatbots for engaging with their customers. Often the underlying technology is not too sophisticated, yet many people are stunned at how human-like those bots can appear. The earliest example of this was an early natural language processing (NLP) computer program called Eliza created 1966 at the ... [Read more...]

How lucrative stocks are in the long run is not only dependent on the length of the investment period but even more on the actual date the investment starts and ends! Return Triangle Plots are a great way to visualize this phenomenon. If you want to learn more about them ... [Read more...]

The workhorse of Machine Learning is Gradient Descent. If you want to understand how and why it works and, along the way, want to learn how to plot and animate 3D-functions in R read on! Gradient Descent is a mathematical algorithm to optimize functions, i.e. finding their minima or ... [Read more...]

In this year’s end post I will give you a little programming challenge! Everybody knows the Christmas song “The Twelve Days of Christmas”! Your task is to write an R script that creates the lyrics! The lyrics are the following: On the first day of Christmas My true love ... [Read more...]

COVID-19 has the world more than ever in its grip – but there is hope: several vaccines have been developed which promise to deliver “95% efficacy”. When people read this many assume that it means that 95% of vaccinated persons will be protected from infection – but that is not true. Even many (science) ... [Read more...]

We already had a lot of examples that make use of the OneR package (on CRAN), which can be found in the respective Category: OneR. Here we will give you some concrete examples in the area of research on Type 2 Diabetes Mellitus (DM) to show that the package is especially ... [Read more...]

We already covered Neural Networks and Logistic Regression in this blog. If you want to gain an even deeper understanding of the fascinating connection between those two popular machine learning techniques read on! Let us recap what an artificial neuron looks like: Mathematically it is some kind of non-linear activation ... [Read more...]

xkcd webcomics is one of the institutions of the internet, especially for the nerd community. If you want to learn how to fetch JSON data from a REST API, download a file from the internet and display a PNG file in a ultra-simple example, read on! Many services on the ... [Read more...]

One of my starting points into quantitive finance was Bernie Madoff’s fund. Back then because Bernie was in desperate need of money to keep his Ponzi scheme running there existed several so-called feeder funds. One of them happened to approach me to offer me a once in a lifetime ... [Read more...]

Everybody knows the Simpsons, everybody loves the Simpsons and everybody can laugh about Bart Simpson writing funny lines on the blackboard! If you want to create your own Bart Simpson Blackboard Meme Generator with R read on! Conveniently enough there is a package for creating memes already (who would have ... [Read more...]

In the area of option strategy trading, it has always been a dream of mine to have a universal tool that is able to replicate any payoff function statically by combining plain vanilla products like calls, puts, and zerobonds. Many years ago there was such a tool online but it ... [Read more...]

In the area of option strategy trading, it has always been a dream of mine to have a universal tool that is able to replicate any payoff function statically by combining plain vanilla products like calls, puts, and zerobonds. Many years ago there was such a tool online but it ... [Read more...]