Into the Unknown
Shadow banking is “money market funding of capital market lending”. Financial globalization and the revolution of modern finance are behind this. Shadow banking is a system has global funding, because it’s the global dollar money markets, of local lending, because the loans are originated for some local purpose. Very different from standard banking, prices are…
Interest Rate Swaps The interest rate swap come into being because of certain kinds of market imperfections that one borrower has access to low cost funding in their local area (for instance, because their government likes them) and no one else has access to that. And so they use that access as a source of…
Economy is coherent, it has structure to it. The discipline of the clearing constraint that forces people, whether they want to or not, to pay attention to their little place in the larger system. The money rate of interest is a symptom of the state of the larger system. There’s another way in which people…
Shadow banking refers to money market funding of capital market lending. We essentially need to extend the money view for the money market to the capital market, to the prices of risk. Traditionally, to most people, the bank’s balance sheet is like this. In the balance sheet, Capital is the FDIC solvency backstop, Reserves is…
Two transport layer protocols User Datagram Program (UDP) and Transmission Control Protocol (TCP) are built upon the best effort IP service. User Datagram Protocol (UDP) User Datagram Protocol is unreliable and connectionless, since there is no handshaking and no connection state. Beyond the Internet Protocol services, which know how to deliver a package to a…
TCP/IP Protocol Suite is to build a network of networks (Internet) that can operate over multiple, coexisting, and heterogeneous network technologies. It provides ubiquitous connectivity through the IP packet transfer. Besides the two well-known protocols, TCP (Transmission Control Protocol) and IP (Internet Protocol), there are other protocols: The Protocol Data Units (PDUs) of a given…
International Transaction in 19th Century Suppose we have a surplus country which is selling goods and receiving bills of exchange (the promise to pay in 90 days from a deficit country) as payments. On the other side of the trade, the deficit country buys the goods and issuing the bill of exchange. However, the bill…
The purpose of fitting models to data is to help answer research questions. We specify models based on theory or subject matter knowledge and then we fit these models to the data that we’ve collected, assuming that the variables in our dataset follow distributions or have certain relationships. The models that we fit to the…
We have been thinking the hierarchy of money, with reserves (or currency which is the liability of the central bank) being the best money. Some where below that in the hierarchy, there are Fed funds, which are promises to pay reserves by banks. Further below that is the Eurodollars, which are international dollars promising to…
The theory of Operations Research has been used to develop models in many fields like statistics and machine learning. Linear Regression We try to find 伪 and 尾 such that a line g = 伪 + 尾 x to minimize the sum of squared errors for all the data points: Despite the word linear in…
In the case of unconstrained non-linear programs, we may determine whether the objective function is convex and then use the first order condition (FOC) to find all local minima. However in practice, most of the time, nonlinear programs are constrained. We can not simply ignore those constraints treating the program as an unconstrained, and then…
Compared with linear programs, non-linear programs (NLPs) are much more difficult to solve. In an NLP, a local minimum is not always a global minimum. A greedy search method like gradient decent may be trapped at a local minimum. Also even the NLP has optimal solutions, these optimal solutions may exist on a boundary, but…
A packet switch network provides communication services among multiple nodes/routers. There are usually multiple route/path from one node/router to another. Which route this the best? The optimality depends on the objective function that the network tries to optimize, for example, minimal delay, minimal number of hops, maximum bandwidth, and the minimum cost. Routing Tables To…
Recall there are a few key items when evaluating a property transaction: Also recall the holding period of a property technically begins on the day after the property is acquired and includes the day of properties disposition. Short-term holding period is where an asset is held for one year or less. Long-term holding period is…
Network flow models are one specific format of mathematical programs. These are used to study operations that are related to network transportation. A unified model, called Minimum Cost Network Flow (MCNF) covers many network operations. MCNF is a special form of linear program or integer program. Even better, MCNF has a very nice property: once…