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Archive for September, 2010

Heteroskedasticity

Yes, I actually do remember Business School 🙂 even though I am doing something very non-MBA right now. ( As in, I no longer sit at a desk, watching crude oil futures prices graphs on the NYMEX and doing a whole lot of market analysis stuff and whatnot! I don’t “worry” so much what the USD/CAD, USD/EUR is doing etc – that’s what I mean) And no, this is not entirely a finance article, well it is somewhat!

The highs, the lows, predictions, rallies, cycles what not…. I am not entirely sure if I miss my life in finance or if I don’t; what I am sure about though is that I am so very passionate about what I am doing right now, and that I will also never really “de-link” myself from financial market happenings. More so, I have derivatives etched very deep into my DNA :-), and intend to get a lot of billable hours out of what I do know about them 😉

So back to Heteroskedasticity (if you don’t know what that means please look it up – its part of the fun to this piece). Lately, I found myself thinking about a situation I was dealing with and the only term that aptly and jumped out at me, to describe the un-said situation is this word. Trust me I am not “geeky” or anything but I found myself just thinking “Heteroskedasticity” – like I was about to take the CFA or Series 63 or something!

Anyway, surprisingly, it kind of settled me down because I realized I was dealing with something that I had no power to “control” in entirety….so I kept it moving. I also realized that even those parts that I could predict, I really could not, with precision; determine what the outcome would be – just like financial markets don’t you think? How many solid models have totally backfired on ingenious market gurus huh!

You unleash volatility in markets and you can’t exactly tell where it’s all going to end. Or can you? (Somebody that has please share!)Last year, at my last position, I attempted to understand implied volatility in derivatives trading; I did get a model going (but without factoring in the volatility part, meaning I had to rework many variables backwards and the LONG way!)….I quickly realized that had I had a solid grasp on volatility, then my model would have taken me much much much less time to build! BUT, I am not doing a PhD in Econometrics – and for good reason. Hahaha!

Anyway, my life right now is rather “volatile”, even erratically volatile sometimes. I can’t predict for sure what, when, how its all going to happen – but I am taking it in stride. The one thing I can predict though, is that I am not allowing de-railers into the already very “aggressive cycle” and that all shall come together!

Yes, I am a realist! And one that believes that everything that happens in my life is for a reason….

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