Day: December 17, 2008

Sign of the Times?

This morning I received a couple of interesting emails. The first being from Vijay Bajaj, WCBF’s Founder&CEO. The second being from Michael Cyger, Founder of iSixSigma.  For those of you who may not be familiar with either organization, iSixSigma is one of the premier commercial organization that provides information and networking to the Six Sigma and Design for Six Sigma Communities through their iSixSigma Magazine, networking events and through The WCBF- Six Sigma Solutions (Worldwide Conferences and Business Forums) focuses exclusively on Six Sigma and related quality Conferences & Events.

The WCBF is giving a limited number of complimentary conferences passes, which can be used at any of their Lean and Six Sigma Conferences and Summits in 2009. In order to “win” one, you must complete a survey. The survey asks for the latest burning, need-to-know issues that should be addressed at events, and asks you to submit your recommendations for cutting-edge, provocative and perspective-shaking speakers. These survey results are certainly going to be used to decide future conference agendas. A bit complicated, but they seem to be gathering the VOC to ensure their future conferences meet the needs of their market, additionally they seem to be positioning themselves to bolster event attendance if needed, knowing travel budgets have been slashed in many organizations.

iSixSigma is offering huge discounts for their upcoming iSixSigma Live! Summit & Awards in January, and throwing in two (2) free 3-hour Master Class Workshops. Additionally, they also give suggestions “pinch pennies” while traveling.

These actions are extraordinary, knowing both organizations are commercial firms and have called the shots over the past years. The current economic crises seems to be taking a toll. I applaud them for their efforts and hope they continue to gather and evaluate the VOC even after these challenging times to are behind us.

Recently, I compiled a list of Lean Six Sigma and related events for 2009. Currently, there are 47 national tradeshows and events scheduled. As I indicated in a past post, I wish each of these organizations would hold one to two per year instead of a dozen or more. This would allow better idea and best practices sharing and potentially reduce costs for the event organizers.

Finance Creature Number 3

For those of you who, like I, assumed speculators, hedgers, and arbitrageurs were all the same critter with different species names, I’ve now considered two of three creatures of finance who make their living by risk assessment and the balancing of probabilities, speculators and hedgers.  The difference between they work is this: speculators accept a certain level of risk in return for a certain probability of payoff; hedgers accept a certain level of risk in one market but try to balance that risk by making in investment with probabilities of an opposite payoff in another market.  So far, so good.  I’ve left the hardest for last: the arbitrageur.

The arbitrageur–who is often not a person but a bank or a brokerage–makes matching deals in an asset–usually a financial instrument–that trades in two different markets at two different prices.  So the arbitrageur buys an asset (or borrows money) in one market and sells it in another market.  In a perfect world the value of the asset would be the same in both markets.  But the arbitrageur is banking on a less than perfect world, because there is profit to be made in the difference between the two different prices. 

Ideally, to avoid the change of either price over time, the buying and selling in the two markets take place simultaneously.  But the arbitrageur knows it is not a perfect world and therefore has to accept some level of price risk.   Successful arbitrage relies on risk analysis, an understanding of option valuation and VAR, value-at-risk, and, especially, on nearly simultaneous electronic trading.  Balancing values and risks clearly calls for Monte Carlo software and genetic algorithm optimization.  But even with the most sophisticated software and the most favorable odds, the timing of these complicated deals is everything.  Profit depends on a cool hand a the computer.