Feeds:
Posts

## Natural human empathy?

During 2009 I reacted emotionally to the people killed in Gaza. This time around, I reacted with a detached sympathy. I realized that empathy for human suffering is not natural at all. It is a conditioned response. We are programmed by ideology and external factors. The various mythologies of tribes, of ‘us’ versus ‘them’ that allows us to shut off human sympathy are all dependent on manipulation precisely of empathy. It is strange to me that from a naturalistic point of view why there is a discrepancy between the dominant ideologies of the planet today and instillation of universal human sympathy. There are many stories of who the bad guys are but this is a serious question that has not really been answered seriously. I was thinking about the genocide of the native Americans and the various ways in which people have dealt with this. It is quite possible that ‘might makes right’ is the true mantra of nature but I would like to believe that there is more to the story. I just don’t believe that the logical impossibility of a creator God has anything to do with any serious answer.

Read Full Post »

## What is volatility reprise

Physicists Challet and Zhang had produced a statistical physics type model ‘Minority Game’ where individual agents choose between two strategies based on past performance.  With their model they could explain long-range correlations in volatility.  Here is a paper: MarsiliMinorityGameModel.  In my opinion, this is a good direction.  The vague analogy for volatility is a sort of temperature and these spin glass type models which introduce micro-interactions and consider thermodynamic limits are consistent with this vague analogy.  A quantitative analogy comes from the fact that fluctuations in solids and long memory in stochastic volatility are modeled with the same tool: Mandelbrot’s fractional Brownian motion.

So the Minority Game is not a full explanation of what volatility is; however, it is an excellent toy model that does give us some insight into how fractional noises could occur.  With this one explanation in mind, we could focus on the quantitative aspects of using long memory correctly:  here it is extremely nice that Donoh0-Johnstone’s wavelet thresholding technique produces minimax guarantees for recovery of Besov functions which allows us to filter SV with IID noise.

I am not sure that the Minority Game is necessarily a correct model that fully captures long memory in stochastic volatility since it makes the restrictive assumption of choice between two strategies but I agree strongly with the idea that the quantitative behavior of stochastic volatility is identical to that for fluctuations in solids or river levels.

Read Full Post »

## Steps toward long memory arbitrage

The main technical issue for long memory stochastic volatility models that I have resolved theoretically is that the Donoho-Johnstone wavelet thresholding method can be used for optimal filtering in a Besov space for the noisy observations of log-stochastic volatility.  This I have implemented using the R package wavethresh.  The functions ‘wd’, ‘threshold.wd’ and ‘wr’ are decomposition, thresholding and reconstruction functions with various thresholding options.  We filter using this method, fit an ARFIMA model and then predict T-days ahead for the ARFIMA and then use the fact that the option price is Black-Scholes with average of the future volatilities from the prediction.   The code is this:

function( histr, P0, K, T ){
histlogr2<-log(histr^2+0.000001)
histlogr2[is.nan(histlogr2)]<-log(0.000001)
n<-length(histr)
z<-djthresh((as.numeric(histlogr2)+1.27)/1.5)
#z<-as.numeric(histlogr2)+1.27
fit<-arfima(z*1.5,order=c(1,0,1))

Read Full Post »

## On the Israeli airstrikes in Gaza

I have been successful to some extent in weaning myself away from geopolitical issues for a short period and then a couple of days ago I found Israel has decided on tens of thousands of airstrikes on Gaza killing more than 120 mostly civilians in retaliation for rocket attacks.  I don’t know the fatalities from the rocket attacks but I would be surprised if there were any at all.  Netanyahu then used the rhetoric of ‘unbowed under international pressure’ as though attacking poor people with jet fighters is some act of heroism.  This is, no less than the Gaza attack of Cast Lead, a totally criminal act in my view.  The fundamental reason it is even accepted in the west is because racism is endemic: it’s okay to kill people so long as they are not white in this brave new world; just consider the ‘international threat’ that would be generated if there were 11,000 airstrikes in a European country with hundreds dead.  Now what was surprising to me is that I saw some footage in a commercial network television which actually gave death toll as well as having a reporter in Gaza for reporting.  This is a slow and welcome change in America, and change that has come through the stuggle of many people.  It is a surprise even if it turns out that it is not very difficult to make the case that Zionists did 9/11 (and for fairly clear geopolitical objectives involving the Greater Israel project).

Of course from my point of view the human race is a single race which implies that there are significant problems with Zionism as well as all other tribalisms and nationalisms.  ‘National defense’ doctrines are mostly without significant content in actual justification of savage barbarous and murderous behavior, whether by Israel or by Palestinians or anyone else.  One thing that had happened during the Second World War is that fascism of Nazis was squelched but fascism–racist fascism–was embraced by Zionists.  Americans generally react badly to oppression and fascism while they have been trained to view all actions of Israel through extremely dense propaganda (of which 9/11 itself is a brilliant centerpiece).  Tribal fervor might explain Zionist enthusiasm for destroying Palestinians and Muslims but it is not any natural tribal fervor: as Shlomo Sand dug into the issue of the ‘Jewish people’ he did not find the Zionist historiography to be extremely trustworthy.  The legitimacy of the Israel’s violent mistreatment of Palestinians lies ultimately in nothing but ‘might is right’.  As a bizarre antiquarian exercise, this might be understandable.  The Huns might have justified their conquest and dominion through similar reasoning but this is criminal behavior for a nuclear power of the twenty-first century.  Of course I condemn the rocket strikes but to be frank these rocket strikes are not particularly lethal, and certainly nowhere comparable to killing hundreds of civilians attacking densely populated areas.

The solution is not very complicated: there should be a single-state democratic solution.  That will stop the ‘defense problems’ for Israelis and produce a positive future for both Israelis and Palestinians.  Zionism has to be dismantled because it is a serious problem for the entire world.  Racist fascists massacring people at will who are not white essentially because they are criminals not being white, is a very bad precedent for the human race.

Read Full Post »