Unicast

At around 33:05 in this podcast, Chris Lydon has the Ghost of Thomas Jefferson on the air! Among other things, President Jefferson says this: "When we are in a state of nature, we have a complete set of freedoms. When we enter a social compact, we do not grant government the right to intrude on our conscience. That is absolutely free and uncoercible and government when it intrudes upon the life of conscience is behaving in a way that is offensive to the natural rights of man."

Then at one point the President has an argument with Professor Joseph Ellis on federalism and John Marshall's legacy, a question which Professor Ellis believes was decided during something called the Civil War and resolved at Appomattox.

Posted by Guan Yang at 12:10 AM | Permalink | Comments (0) | TrackBacks (0)

Daniel Farber: "If somebody had told me in 1968 that Republicans would make all but two of the Supreme Court appointments of the next 37 years and at the end of that time, Miranda would still be on the books, there would be a constitutional right to abortion, and all the Warren court's major decisions would still be there, I never would have believed it." (From a New York Times article.)

Posted by Guan Yang at 05:50 PM | Permalink | Comments (0) | TrackBacks (0)

Who in the world did the copyediting for Richard Parker's otherwise excellent biography of John Kenneth Galbraith? On page 536, the last names of economists Paul Romer, David Romer and Christina Romer are spelled "Roemer." And Galbraith received the Presidential Medal of Freedom, not the Medal of Honor, from President Clinton (12th page in the second group of plates).

Posted by Guan Yang at 12:53 AM | Permalink | Comments (0) | TrackBacks (0)

They are being uploaded to this album. Be patient if you expect the photos to be oriented correctly, I probably won't get around to that until tomorrow.

This is a nice (non-trip-related) portrait, one of my favorite pictures, taken in the lobby of the SIPA building at Columbia University. This is another fairly intense portrait, taken somewhere around Columbia also. There's also the obligatory photo of me sitting at the Fed board table; my tie is loosened and shirt unbuttoned because the meeting hasn't started yet.

Posted by Guan Yang at 01:00 AM | Permalink | Comments (0) | TrackBacks (0)

On Wednesday afternoon we visited the Federal Reserve Board where Dr. Matt Pritsker gave a very good lecture on Derivative Securities and Systemic Risk (slides, 116k pdf). In the Board Room where Federal Reserve Board and Federal Open Market Committee meetings are held and Charlie from our group got to sit in Mr. Greenspan's chair, while the others sat in the other members' chairs. Only a few of the chairs had nameplates so I don't know which seat I was in.

The lecture centered around the model by Gennotte and Leland (AER 80 999–1021). Dr. Pritsker is a good teacher and the topic was fascinating, but it was a bit surreal to have a real bona fide economics lecture – supply and demand diagrams and Greek letters and all – in the Board Room.

Posted by Guan Yang at 12:20 AM | Permalink | Comments (0) | TrackBacks (0)

John Maynard Keynes: "It is ideas, not vested interests, which are dangerous for good or evil. Ideas, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else."

Posted by Guan Yang at 10:06 AM | Permalink | Comments (1) | TrackBacks (0)

This morning we spent an hour at the Center for American Progress where John Irons hosted a Q&A about the Center, think tanks and American policy. Dr. Irons was very witty and informative, and the girls were quite impressed that he had Peter Diamond as his advisor in graduate school.

CAP is apparently now the second-largest think tank with more than 100 staff. It would certainly be interesting to have that kind of intellectual firepower informing the policy debate in Denmark where economists, in particular, do relatively little in the way of public communication and bridging the gap between economic theory and concrete policy initiatives.

Posted by Guan Yang at 06:45 PM | Permalink | Comments (0) | TrackBacks (0)

The trip is progressing nicely. Yesterday we visited were on a tour of Columbia University and visited their Earth Institute. In the afternoon we were on a tour of the UN and met for more than an hour with an adviser at the Danish UN Mission.

Today we spent almost two hours discussing health and the pharmaceutical industry with Robert Waldon of Pfizer, their head of Corporate Affairs in EMEA.

Photos will be up later.

Posted by Guan Yang at 05:24 PM | Permalink | Comments (0) | TrackBacks (0)

Posted by Guan Yang at 12:44 PM | Permalink | Comments (0) | TrackBacks (0)

The prize is going to Robert J. Aumann and Thomas C. Schelling.

Reaction: Alex Tabarrok, Will Wilkinson, William Polley, Lynne Kiesling, Michael Mandel, Andrew Samwick, David Tufte, Greg Ransom, Tyler Cowen here and here and here and here, Bob Subrick, Phil Miller, Pablo Halkyard, Ben Muse, Max Sawicky, Kieran Healy, Tim Harford.

Posted by Guan Yang at 11:56 AM | Permalink | Comments (0) | TrackBacks (0)

John Kenneth Galbraith turns 97 next Saturday. The New Economist has commentary. The definitive authorized biography is Richard Parker's. Eric Alterman has a post about Galbraith.

Posted by Guan Yang at 02:00 PM | Permalink | Comments (0) | TrackBacks (0)

Posted by Guan Yang at 08:25 AM | Permalink | Comments (0) | TrackBacks (0)

I'll be visiting the Senate gallery in two weeks.

Posted by Guan Yang at 10:20 PM | Permalink | Comments (0) | TrackBacks (0)

On the trip, our visit at the Federal Reserve Board will include a presentation by Matthew Pritsker on "Financial Derivatives and Systemic Risk to the Economy". The Fed selected the title among several we had suggested, and as most of the participants won't be familiar with this issues, there will be a brief note (after the fold) on this topic. (Work in progress.)

Finansielle derivater

Finansielle derivater er såkaldte afledte instrumenter, dvs. at deres pris og andre egenskaber afhænger af prisen på et underliggende aktiv.

Optioner

Et eksempel kan være en option, som er en ret til enten at købe eller sælge et aktiv, typisk en aktie. Det viser sig fx. at en options værdi afhænger af volatiliteten på det underliggende aktiv, dvs. hvor meget den svinger i værdi.

Se for eksempel på denne side, der indeholder de optioner der er på Googles aktie. Her er et udsnit i skrivende stund:

Disse er call optioner på Google, dvs. at de giver en ret, men ikke en pligt, til at købe Google aktier til en bestemt kurs (strike kursen, som står i fed i søjlen til venstre) inden en bestemt dato. En option der giver mulighed for at sælge aktivet hedder en put option. Kursen på Google er lige nu 315.57. Derfor er alle call optioner med en strike kurs under 315.57 "in the money," hvilket betyder at en som holder denne option umiddelbart kan tjene penge ved at udnytte den. I kurslisten er in-the-money optioner markeret med gult.

Se for eksempel på den nederste linje, GGDJH. Denne er en "out of the money" option der giver retten til at købe en Google-aktie senest den 21. oktober 2005 til en kurs på 340 dollars. Den er senest handlet for 2 dollars. Der er handlet 141 af dem i dag og der er i alt 11376 af denne type optioner udestående. (Hvis man går ind på siden er der en menu øverst under overskriften "Options" der giver adgang til lister over optioner der udløber senere end oktober 2005. Lige nu handles der Google-optioner med udløb indtil januar 2008.)

Hvis jeg tror at Google inden den 21. oktober kommer til at stige til over 340 dollars - fx. 25% til 425 dollars - kunne jeg have købt en masse Google-aktier. Når kursen så er steget, kan jeg sælge aktierne igen og tjene 25% af hvad jeg har investeret, fratrukket transaktionsomkostninger. Omvendt kan jeg risikere at miste 100% af hvad jeg har investeret hvis kursen falder og jeg sælger hurtigt nok.

Jeg kan i stedet købe en option til 2 dollars. Hvis kursen bliver 425 dollars inden den 21. oktober, har jeg tjent 425−340=85 dollars per option, eller et afkast på 4250%. Hvis kursen omvendt falder til under 340 dollars, jeg har bare mistet de 2 dollars jeg betalte for optionen.

Hvis jeg derimod forventer at Google-aktien falder, kan jeg købe put-optioner som giver mig ret til at sælge til en (høj) kurs. Jeg kan også vælge at sælge eller "skrive" en option. Så vil jeg være forpligtet til at sælge (for call-optioner) eller købe (for put-optioner) det underliggende aktiv til strike-kursen hvis køberen af optionen kræver det. Til gengæld får jeg prisen på optionen, kaldet præmien.

Der findes optioner på mange forskellige aktiver. De mest almindelige er optioner på aktier, men man kan også finde optioner på futures, valutaer og på råvarer som fx. soyabønner.

Guan har lige prissat en call option på "kabel" (britiske pund mod dollar) med strike kurs på 1.7700 og udløbsdato den 7. november. Han kan vælge at købe eller at sælge ("skrive") sådan en option.

Swaps

Et andet eksempel på et meget brugt derivat er en swap, hvor der bl.a. findes valutaswaps og renteswaps. En swap er en aftale om at udveksle to betalingsstrømme. Det kan fx. være en variabel rente og en fast rente, eller beløb i to valutaer.

Når den danske stat låner penge i yen på det japanske marked, står staten med en valutakursrisiko - hvis kursen på japanske yen stiger, vil det pludselig blive dyrere at betale ydelserne på lånet. Danmarks Nationalbank kan derfor arrangere en swap, hvor man aftaler at betale et fast beløb i danske kroner og modtage et fast beløb i japanske yen. De japanske yen man aftaler at modtage kan så dække ydelserne på gælden, og staten i så i realiteten et lån i danske kroner.

En virksomhed der låner penge til en kort variabel rente, men ønsker at sikre sig mod risikoen for at renten pludselig stiger, kan indgå i en renteswap hvor man aftaler at betale et fast beløb mod at modtage et variabelt beløb der er fastsat efter markedsrenten. Det arrangeres så det variable beløb svarerer til udsvingningerne i den rente der skal betales på lånet, så virksomheden i realiteten har et fastforrentet lån.

Futures

En future er en aftale om at levere et aktiv til en bestemt pris på et tidspunkt i fremtiden. Traditionelt har futures været handlet i råvarer, fx. råolie, stål, soyabønner eller, som Eddie Murphy gør i filmen Trading Places fra 1983, frossen koncentreret appelsinjuice. For eksempel kan man i skrive stund købe soyabønner til levering i november 2005 til 566 cents per bushel (hver future er dog på 5000 bushels). I dag findes der dog futures på stort set hvad som helst, bl.a. aktier, aktieindeks, valutaer og renter.

En af de mest handlede futures i verden er den råolie-future der handles på New York Mercantile Exchange. Denne future afregnes fysisk ved en olieterminal i Cushing, Oklahoma. Der findes dog også en pendant, e-miNY, der afregnes kontant. Grafen for denne future er vist forneden.

Det særlige ved futures eller optioner med kontant afregning er at der ikke sker en fysisk overlevering af det underliggende aktiv, fx. råolie eller aktier, men at man afregner prisforskellen mellem kontrakt- eller strike-kursen og den aktuelle kurs kontant, i dollars. En future på et aktieindeks, fx. de KFX-futures der handles på Københavns Fondsbørs, afregnes kontant ved at profitten bliver udbetalt i kroner, da det ville være for besværligt og dyrt at skulle afregne med en portefølje af KFX-aktier.

En future på et finansielt instrument som aktier, valutaer eller aktieindeks kaldes en finansiel future.

Kursudviklingen på e-miNY Light Sweet Crude Oil, Nov 2005 (kontant afregning)

Kursudviklingen på 3 måneders Euribor future, Sep 2007

Credit default swaps

Der findes tusindvis af eksotiske derivater på markedet, hvoraf mange ikke handles på børser, men kun direkte mellem investorer, men credit default swaps har fået stigende opmærksomhed i senere tid fordi de ses som en væsentlig kilde til systemisk risiko.

Betragt en erhvervsobligation som denne inkonvertible obligation udstedt af bilproducenten Ford med udløb i 2018 og en kuponrente på 6.5%. En person som køber denne obligation låner penge til Ford og får en vis rente for at give afkald på forbrug nu mod til gengæld at kunne forbruge i 2018. Samtidig bliver han dog også belønnet for at påtage sig en vis risiko, nemlig risikoen for at Ford misligholder obligationen på et tidspunkt mellem i dag og den 1. august 2018.

Hvad gør man hvis man sidder med noget risiko? Man forsikrer sig imod det. En credit default swap er en forsikring mod at en virksomhed går i betalingsstandsning. En credit default swap på Ford koster typisk omkring 500 basispoint. Det betyder at man skal betale 5% om året for at forsikre sig mod at Ford går konkurs. Da afkastet på Ford-obligationen ligger på omkring 9%, og afkastet på en risikofri amerikansk statsobligation er omkring 4%, giver dette god mening.

Forskellen mellem en credit default swap (CDS) og traditionel forsikring er at man ikke behøver at have risikoen for at købe en CDS. I forsikringsverdenen kan man ikke købe forsikring på risiko man ikke har og man bliver kun kompenseret for faktiske skader - jeg kan ikke købe en forsikring så jeg får penge hvis der går ild i dit hus; du kan godt købe den forsikring, men selv da får du kun en udbetaling hvis huset rent faktisk brænder ned eller der sker skade. I et marked med CDS'er kan kreditrisiko derfor handles fuldstændig separat fra den underliggende kredit og man kan satse på at bestemte virksomheder går konkurs.

Ifølge BIS er der globalt udestående CDS'er for omkring 4000 mia. dollars nominelt.

En CDO er ... En syntetisk CDO er ...

Markedet for derivater

OTC ...

Generel ligevægt ...

Formålet med derivater

CAPM

CAPM ...

Spekulation

Spekulation/gamling ...

Hedging

Hedging ...

Transaktionsomkostninger og gearing

Transaktionsomkostninger ...

Imperfektioner i kapitalmarkederne

Uperfekte kapitalmarkeder ...

Syntetiske produkter, Fannie Mae ...

Risikostyring

Hedging ved handel ...

Margin

Systemisk risiko

Posted by Guan Yang at 04:04 PM | Permalink | Comments (0) | TrackBacks (0)

Marginal Revolution: Practice exam questions for macroeconomics: 4. Write your own exam question and answer it. You will be graded on the quality of the question as well as your answer. The submission of "Write your own exam question and answer it" would give you, for a philosophy class, an "A+", but for macroeconomics, a "C minus".

Posted by Guan Yang at 03:52 PM | Permalink | Comments (0) | TrackBacks (0)

I've just started using MarsEdit, and it's probably the first desktop blog editor that I actually like.

Posted by Guan Yang at 01:47 PM | Permalink | Comments (0) | TrackBacks (0)

SCOTUSblog: Commentary: Mortgaging Miers' Future: "President Bush, in his enthusiastic defense of his choice of Harriet Miers for a seat on the Supreme Court, has made more complex her task before the Senate Judiciary Committee. But, more significantly, he has attempted to mortgage her future service, if the Senate does approve her for the Court. As a result, a nomination that already seems to be in some trouble may be even harder to sell to the Senate and to the country." This is pretty scary and certainly what President Bush meant, but might Lyle be overestimating the extent to which Miers would be "mortgaged" by these statements?

Posted by Guan Yang at 01:41 PM | Permalink | Comments (0) | TrackBacks (0)

I am watching the second episode of Commander in Chief. Like Dave Winer, I like it, but the pacing is just so slow compared to that other show.

Posted by Guan Yang at 07:58 PM | Permalink | Comments (0) | TrackBacks (0)

In the spirit of Mahalanobis, I am predicting that this year's Nobel Prize in Economics will go to Jagdish Bhagwati.

Posted by Guan Yang at 05:43 PM | Permalink | Comments (0) | TrackBacks (0)

The best places to follow the nomination process are SCOTUSblog, with lots of insightful commentary by the folks at Goldstein & Howe, and How Appealing. Also good is Washington Post's Courts RSS feed.

Via Dave Winer, Jason Lefkowitz has a hilarious perspective on the nomination. Also check out Harriet Miers's blog.

Posted by Guan Yang at 09:04 AM | Permalink | Comments (0) | TrackBacks (0)

From the 37 guys: "If you just want to write, share, revise, and compare quickly, easily, and with minimal fuss, check Writeboard out." It's like a wiki with only one page and with good revision control and diffs. Yes, this may sound stupid, but I've actually wanted to use Writeboard several times over the past months when I was composing short pieces of text collaboratively.

Posted by Guan Yang at 05:17 PM | Permalink | Comments (0) | TrackBacks (0)

According to Straight Dope: "If he could spend the night in a woman's embrace without feeling sexual stirrings, it would demonstrate that he had conquered his carnal impulses."

Posted by Guan Yang at 01:57 PM | Permalink | Comments (0) | TrackBacks (0)

The Rasterbator is a cool app (web-based and Windows) that can turn your favorite photo into a rasterized black-and-white or duotone image that you can print out on a laser printer and stick to your wall.

Posted by Guan Yang at 09:34 PM | Permalink | Comments (0) | TrackBacks (0)

Tim Harford: "It may seem easy to give things away, but it is not. The more attractive the gift, the more damage people will do to themselves, and each other, trying to get hold of it."

Posted by Guan Yang at 09:32 PM | Permalink | Comments (0) | TrackBacks (0)

I've now completed the upgrade to MT 3.2 and things seem to be working. This is not just a regular upgrade; I've completely rebuilt it with an export/import, a new database and I'm reverting to stock Movable Type codebase without any modifications. The only major problem seems to be that the import process has added titles to all my title-less posts; this is annoying, but not so much that I'm bothering to fix it.

I've installed the new version of SCode for MT 3.2, changed the templates a bit, removed the Atom feed and changed various URL templates so they match the old layout. Please post a comment here if you find that I've missed anything.

Posted by Guan Yang at 08:58 PM | Permalink | Comments (0) | TrackBacks (0)

Posted by Guan Yang at 06:36 PM | Permalink | Comments (0)

Posted by Guan Yang at 06:32 PM | Permalink | Comments (0)

Posted by Guan Yang at 06:23 PM | Permalink | Comments (0)