by R. Passov

Modeling in finance is done through the lens of mathematics. To put something into a model where you are not guided by observable constants, such as the speed of light, requires assumptions.

With so many models off the shelf a common understanding of assumptions is slipping by. If you go far enough back, most good finance text books bothered to explain the assumptions underlying the model. One such text – Modern Finance by Copeland and Weston – offers a comprehensive discussion of the assumptions necessary to argue that the world of asset pricing is mean-variant efficient (MVE.)

MVE underpins the Capital Asset Pricing Model (CAPM), the second most important model in all of finance; a model most students in business classes in western universities are exposed to; and something that simply can’t work. Much can be proven about what the model can say.

The most important of which is that there’s a certain portfolio of assets – the Efficient Frontier – that is better than all others.

But it turns out that while this portfolio can always be found in historical data, it can never be identified in the present.

But there are other models which can be derived from the same set of unrealistic assumptions. In 1997, The Nobel Prize committee awarded the prize in Economic Sciences to Robert Merton and Myron Scholes for their “… method to determine the value of derivatives,” – the Black Scholes Options Pricing Model (BS).

These two, along with Fisher Black who had passed prior to the award, solved the puzzle of pricing the right which affords its holder a specific time frame within which to purchase, for a set price, a risky asset. The right can be to buy (a call) or sell (a put) or otherwise manipulated in almost any fashion that mathematics allows, and still some form of the BS equation will arrive at a price.

The assumptions necessary for the options pricing model to mirror reality have never been met. And yet, pricing options and the reams of creative derivatives that spew forth is a several-hundred-trillion-dollar market.

The notional value of derivatives collapse, or ‘net,’ to a much smaller number as most activity is part of a giant zero-sum game. Still, options exist. Farmers have long since contracted in advance to sell yet-to-be harvested crop. It’s only in the past 45 years that a workable formula has been available to help someone negotiate a price.

The basic formula was derived in 1900 by a French mathematician. Read more »

by Brooks Riley

by Bill Murray

A fine young man with a Yesus Kristus medallion bouncing around beneath his mirror drove us the seven or so kilometers into Mt. Kinabalu park, through the sleeping village of Kundasang. Farmers congregated at a warren of tin-roofed stalls along the main road. It looked like a good day for green tomatoes, potatoes, and cabbage.

They hauled us all in bas minis from the ranger station to the trailhead. From there, a six-kilometer trail led up to our destination, the Laban Ratah guest house, at 11,000 feet. At 13,432 feet, Mt. Kinabalu’s summit, in Malaysian Borneo, is the highest point in Southeast Asia.

Just at first the trail led downhill, charming, to a cool, wet place called Carson’s Falls. On the way down the mountain, conversely, having to climb at the end was just one last kick in the butt on the way out the door.The first kilometer (the trail was marked at each 1/2 kilometer) popped by in 23 minutes. We were flyin’, and all that stuff about how hard this would be was just talk. The first kilometer, we only stopped long enough to shed our wraps.

Still before 8:00 a.m. no sunlight had fought its way to the forest floor. The air was downright chilly once our shirts turned sweaty. And they did — at the first K marker they weren’t soaked through, but a breeze blew down the rise and chilled our damp skin.

We were cocky, jaunty, making tracks, and unappreciative of the flora, except the little violet flower of the Kinabalu Balsam, which was shaped more like it had a beard than lower petals.

The massif stood silent and still, the only sounds birds or a rustling squirrel. There are no monkeys on Mt. Kinabalu. They live nearer the sea, to the east. Read more »

Apple orchard, path, and dandelion field in the hills above Franzensfeste, South Tyrol, in April of 2020.

by Zara Houshmand

Stefany Anne Golberg’s My Morningless Mornings is one of the most unusual books I’ve ever encountered. It’s very quietly ambitious, framing its aspirations without obvious fanfare, and it accomplishes them with rare elegance and efficiency.

Ostensibly the book is a memoir, but just barely. Its narrative scaffolding consists of memories from a period of Golberg’s life when, as a young teenager, she kept a nightly vigil in her suburban Las Vegas home while her father descended into mental illness. The rest of her immediate family had jumped ship. Staying awake every night until dawn and then sleeping from dawn until noon, she evaded the morning—a time fraught with anxiety and the burdens of reality. The night time hours were filled with the drone of old films and documentaries on television and with stacks of library books and encyclopedias that fed her self-directed education.

That narrative scaffolding is constructed with exquisite finesse and reserve, without the faintest hint of melodrama. The things unsaid—the absences—are as powerful as what is revealed. Consider this passage:

From the window I could also see the evergreen trees that had been planted in front of my house when I was one year old. They had become sick and thin, following the rest of the backyard, making it easier for the sun to reach the anguished message my father had scrawled in giant block letters on the driveway earlier that spring.

What were they, the trees? Junipers, I think. They had round, pale fruits that tasted like rocks and were the color of a northern sea, the color of water Jules Verne must have sailed across in his little wooden skiff, the color of Jacques Cousteau’s eyes when he gazed across the bow, just before diving down deep. Maybe this is the fear we all share. That when the morning comes, and shines its light, we will have to read the message that has been put there before us. Or worse, that there will be so much sunlight and nothing at all to see.

That single image of the message written on the driveway is the totality of the story, one of a small handful of carefully placed details where the constant background tension of her father’s decline breaks through the surface. But in the voids created by that minimalist narrative, another world emerges. Here the mention of Jules Verne and Jacques Cousteau looks back to a passage earlier in the book, that launches from Cousteau’s late night television documentaries, and how Verne’s imaginary expeditions inspired his career, into the fathomless, sunless, undersea world as an expression of shadow work, and Verne’s fantastic vehicles as fully contained interior spaces where “a ship is a symbol for the perfection of one’s inner humanity.”

These chains of reflection crisscross through the book, weaving together themes of darkness and light, sleeping and waking, and the transitional regions of dawn’s twilight and the dream world. Read more »

Self-pity on a Sunday in April

I went for a walk in the afternoon.

I don’t like all the people with their masks.

I don’t like people without masks, they are suspicious.

I don’t like the people I encounter,

Because they force me to pull up my annoying mouthguard.

I don’t like the empty streets because I don’t encounter anyone.

I don’t like myself because I’ve had too much of it these past few weeks.

A friend recommended me to go to the balcony and look at the stars, they are especially beautiful to see right now, but it’s cloudy here.

At least you can smell the neighbor’s lilac.

That’s good.

Listening to “Song of the Wind” by Carlos Santana, I still like it.

That’s good too.

by Georg Hofer, translated from the original German by Facebook’s algorithm

***

by Anitra Pavlico

As we continue to distance ourselves from others in the midst of the new coronavirus pandemic, we hear about other people’s new rituals and routines as we formulate our own. As each day to be spent at home stretches (looms) ahead of us when we awake in the morning, rituals give the day shape, symmetry, a framework. What significance do these new rituals have for us individually and as a society? What did the old rituals mean? What if we were to take an anthropological approach to our own predicament?

Health experts are now saying that the time-honored greeting in the West, the handshake, should be reexamined. Anthony Fauci says: “I don’t think we should ever shake hands ever again, to be honest with you.” While the origins are uncertain, people from ancient Egypt to Mesopotamia to ancient Greece were depicted as shaking or displaying open hands as a sign of trust thousands of years ago. People would show their empty right hand to demonstrate that they were not carrying a weapon and that they had amicable intentions. While the original motivation for showing your empty hand might have faded, the handshake is still a potent signal of willingness to cooperate and of trustworthiness. Yet as a deadly virus circulates, the handshake seems insensible. Some health experts have pointed to Japan, which has done much better than other nations in this pandemic, as a case in point: hand-shaking is not common there, and the society in general highly prizes cleanliness, with people routinely wearing a face mask even if they only have a common cold. It is hard to imagine the handshake going away, but the longer the pandemic lingers, the more likely that something else will enter the mainstream to take its place. The key is to develop ways to refuse a handshake without offending or embarrassing the other party. These social niceties do more to keep society functioning than COVID-19 has done, so far, to threaten its underpinnings. Read more »

Sanford Biggars. Neroluce, 2018.

Antique quilt, textiles, tar and glitter.

More here, here, and here.

by Tim Sommers

Suppose that we are better at recognizing and diagnosing injustices than we are at imagining what an ideal society looks like – much less redesigning our social institutions to achieve that ideal. Elizabeth Anderson, for one, has argued that egalitarians “have always been better at criticizing inequality than at devising a coherent and successful conception of a society of equals.” And Amartya Sen has argued that we don’t need any overarching ideal of justice to identify “manifest injustices”.

Suppose that justice has something to do with, or even is a kind of, equality.

The so-called Founding Fathers first principle (sans racism and sexism) was that “All… [people] are created equal.” Ronald Dworkin famously suggested that all modern theories of justice occupy the same “egalitarian plateau”. The “priority of equality” or the “presumption of equality” – the idea that equality is the default position when it comes to justice, and only departures from equality demand justification – is widely held.

Think of it like this. Aristotle said that justice was giving each person their “due” – and almost two and half millennial later Rawls and Cohen both (more or less) still agree. The presumption of equality is that what I am due is the same as what anyone is due. So, when I demand justice, aren’t I always demanding that I be treated the same – in some way or another – as others. Injustice, or at least the most basic kind of injustice, is a failure to treat like cases alike in a way that privileges or benefits some over others.

What have real life egalitarians and social justice activists wanted, then? Read more »

by Michael Klenk

Our society needs virologists. Heeding their advice is valuable and consequential. In the Coronavirus pandemic, German politicians listened to the virologists, and Germany is doing relatively well. Other political leaders have (too long) ignored the virologists, and their citizenry is paying a high price.

Put another way; virologists appear to be systemically relevant. That term is central in the current German Coronavirus-debate. Systemically relevant institutions like hospitals, supermarkets, and gasoline stations are less affected by physical distancing measures than (allegedly) ‘systemically irrelevant’ institutions like florists, coiffeurs, theatres, and football competitions.

Talk of systemic relevance may be helpful to organise a society in crisis. It is like societal relevance with a survivalist spin. It implies that, in times of crisis, our ‘society’ shrinks back to a ‘system’ focused on the bottom levels of Maslow’s hierarchy of needs – health, food, and shelter. Societies around the globe have accepted this logic. Pandemic-related restrictions apply more strongly to those not deemed societally relevant, and people (predominantly) complied voluntarily. As an initial reaction to the pandemic, focusing on ‘systemic relevance’ has worked.

However, we can already see that ‘systemic relevance’ gets politicised. For example, lobbyists and interest groups are advocating for increased economic support or lessened Corona-related restrictions for their fosterlings, defending them as systemically relevant institutions. As the initial shocks of the pandemic have abated, as in Germany, people want to get back to normal as soon as possible and the term ‘systemic relevance’ is posed to be a vehicle for them to defend their various interests in the months to come. Read more »

by Brooks Riley

by Adele A. Wilby

After assuming the mantle of a ‘vulnerable’ member of society and with many of my contacts temporarily closed off to me consequent to the British government’s public health policy of ‘social-distancing’ in place during this coronavirus pandemic, time is something I have plenty of. Thus, I took a tour of the unread books on my sitting-room table. Three books screamed out at me that they had been waiting for some time for me to pick them up and read them, but they had been constantly pushed to the end of the queue in preference to more urgent others that were later arrivals. Now I have time for them; it was their turn to be read, and they were worthy of the attention. The complexity and beauty of plants are the themes of these three books: Jonathon Drori’s Around the World in 8o Trees, Stefano Mancuso’s The Revolutionary Genius of Plants: A New Understanding of Plant Intelligence and Behaviour and his The Incredible Journey of Plants.

Like many of us on this planet, apart from an aesthetic appreciation of plants and our favourite trees and flowers, I have not given too much attention to what actually constitutes a plant. Had I known that, according to Mancuso, 80 percent of the earth’s biomass is taken up by plants, I might have given these inhabitants of the planet greater thought. Likewise, I was astounded to learn from Drori that there are at least 60,000 distinct species of trees sharing this planet with us: understanding more about plants was clearly a necessity. Read more »

by Tamuira Reid

Go to where the trees are.

This is what the voice was saying. My voice. My real voice. Not the borrowed ones, the kind I try on for size when I can’t find my own, voices I can hide behind. Not those. My real voice likes to shoot from the gut, likes to tell me exactly what the fuck needs to happen and how it will go down. And it was telling me to go to the trees.

I find my son buried in a book in our living room, body sprawled out over the rug. I don’t say anything when I give him the backpack, not the one for school with OLLIE scribbled on the side in sharpie, the one I just found out he’ll no longer need, but the one with a roomier body and hidden pockets inside. The one that he asked for when he was four years old, the “pack-pack” that made him feel like a big boy. He didn’t want Thomas the Train that year; he wanted luggage. Something he could haul around the airport while I got us from point A to B.

I give him the backpack and watch him go to work. Just the essentials, only what you really need, although all he’s ever really needed is me. His nine year-old hands sift through shoeboxes of Legos and Hot Wheels, drawing pencils with chewed-up erasers, key chains with no keys. He begins to make decisions. Sort. Choose. Three big Ziplocs worth of toys because four is pushing it. Because if he packs too much shit he won’t have room for his snacks.

This is number twenty. The twentieth apartment we’ve lived in since he was a baby. In the city, out in the boroughs, across the country and sometimes over the ocean. Subletting, housesitting, visiting, cat-feeding. Staying afloat on adrenaline, on single-mom scrappiness.  I want you to see the world, even if it means we don’t always have a place to come back to. There’s a storage locker somewhere in the Bronx full of my stuff, and it’s been sitting there, rotting, for over a decade. We’ve traded furniture for a Target purple suitcase that is duct-taped at the seams.

So when it’s time to pack, he doesn’t ask a lot of questions. He just gets busy. I think we both know when it’s time to leave. Read more »