The Neural Network and the Click-Through

As the market for neural network software has become more and more competitive, I’ve been intrigued to watch the proliferation of applications for this breed of statistical analysis.  In a week that has produced news of neural networks put to use to diagnose epilepsy, pick stocks, protect children from internet pornography, and predict wind power […]

Fed Uses Monte Carlo Simulation for Stress Test

The U.S. Federal Reserve recently released the results of a comprehensive assessment of the financial conditions of the nation’s 19 largest banks, which hold two-thirds of American economic assets. This “stress test” was designed to determine the capital buffers required for the banks to withstand losses and maintain lending even in worsening economic conditions. Officially […]

Eating Time and Economic Growth: The Stability of Correlation Coefficients

I have been meaning to write about the stability of correlation coefficients for a while, and have been spurred into action by a recent article in the International Herald Tribune (“Eat Quickly, for the Economy’s Sake,” May 8, 2009). The article discusses the relationship between economic growth and time spent eating, based on a recent […]

The Efficient Frontier and Monte Carlo Software, II

Let’s move on from yesterday’s blog on the Efficient Frontier, formulated half a century ago by Harry Markowitz, to the New Frontier postulated by investment advisor Richard Machaud.  Michaud is the author of Efficient Asset Management:A Practical Guide to Stock Portfolio Optimization and Asset Allocation (Oxford University Press, 2008), among other works, and now heads […]

The Efficient Frontier and Monte Carlo Software, I

In my comments over the months since the economic sucker punch landed, I have been reiterating that Monte Carlo simulation is not to blame for the faulty risk assessment that brought down the derivatives markets. The assumptions that went into those risk simulation models were the source of the trouble, and that’s too bad, because […]

Wall Street Journal Confuses Monte Carlo Simulation with Models

The recent Wall Street Journal article “Odds-On Imperfection: Monte Carlo Simulation” asserts that Monte Carlo simulation did not predict the market crash, and cites a chorus of critics calling for a fix to the technique. The article equates the technique of Monte Carlo simulation with the models that are using it – two very different […]

Six Sigma and Call Center Etiquette

A recent article on isixsigma content zone called Delight Customers: Reduce Defects in Service Delivery by Shivprasad Kandiraju deals with Six Sigma practitioners looking at how customer surveys revealed crummy customer service at a call center in India, and how they approached fixing it. The practitioners collected and analyzed benchmarking data from various companies, and […]

Baseball and Environmental Regulation

"Formal quantitative assessments of uncertainty can mark a truly significant step forward in enhancing regulatory analysis under Presidential Executive Orders."  This stuffy-sounding statement appeared today in a otherwise trenchant Huffington Post column by Harvard environmental economist Robert Stavins.  Dr. Stavin’s target in today’s piece is the so-called RIA–the Regulatory Impact Analysis required by Presidential Order […]