QuantMinds.com is a place to focus on Quantitative Finance, Risk Management, Trends Forecasting, Data Mining and Market Insights. In addition, we are dedicated to market analysis, commentary, and proprietary research. Our aim is to encourage the activities using scientific research and quantitative methods in business decision making and market analysis. QuantMinds.com is currently mixed in resource collection and empirical research. We sometimes reproduce results of previous empirical studies using different data resource or empirical methodologies to grow our knowledge base. QuantMinds.com is running as an 100% non-profit website. Some resources are password protected, which is available upon registration and request.

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Featured Articles
A little boy or a man – on Google’s Q2 results

A little boy or a man – on Google’s Q2 results

  This post was triggered by recent articles in riskpredicitons.info. Shall we short Google? A lot people like Google because this company is a bit childish and naive. But every company/industry would have a life cycle, which means you won't stay in one place forever. Time passes so quickly. It has been 15 years since Larry Page and Sergey Brin met at Stanford and set up this internet ...

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Don't be evil: risk rating, China, Google and algorithms

Don't be evil: risk rating, China, Google and algorithms

The dark role of risk rating agencies played in financial crisis (i.e., recently it is focused on EU debt crisis since credit rating agencies did not anticipate the Greek financial crisis) was one of the most debated topics in terms of financial regulation on G20 Toronto summit. Not only the European leaders criticize risk-rating agencies for downgrading Greek debt, the compliant also came from different perspectives, such as ...

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Predictive modeling on probability of default – logit model using Microsoft Excel and VBA

Predictive modeling on probability of default – logit model using Microsoft Excel and VBA

Logistic regression is often used to estimate the probability of default in commercial loans against different types of borrowers (obligor’s PD model). Microsoft Excel is probably the most popular used software in daily banking business work. However, the logistic regression model function is not captured by Excel. In this case study, I developed a Visual Basic Application (VBA) add-in in Excel macro environment to regress the ...

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Predicting default risk using Merton’s model – a case study in Chinese stock

Predicting default risk using Merton’s model – a case study in Chinese stock

This case study presents a simple spreadsheet-based version of Merton’s credit risk model (i.e., normally as KMV model) to predict default risk using a Chinese utility stock data (Quote: 600021 Shanghai Electric Power Limited) from 2008 to 2009. Due to the limitation of data availability in developing country such as China, the option-based modeling approach is to be the most straightforward approach to evaluate the default ...

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iPad told us: consumer survey is generally wrong

iPad told us: consumer survey is generally wrong

It was a joke to read the consumer survey on attitudes towards iPad demand back to February today.  It indicated that "... a failure to convince any new buyers to consider the iPad. Not only did Apple fail to convince new buyers, it may have lost many potential buyers who now say they don’t think they need an Apple tablet computer...".  The market researchers behind the research would ...

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SAS code to compute distribution of default

SAS code to compute distribution of default

Douglas W. Dwyer, from Moody's KMV published "The distribution of defaults and Bayesian model validation" at Journal of Risk Model Validation (23–53) Volume 1/Number 1, Spring 2007. The article can be downloaded from here. In the Appendix A of this wonderful article, he presents the SAS code to compute distribution of default. This is extreamly useful to calculate the upper and lower bound of low default portfolio. ...

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Angles vs. Devil - Two Pictures of David X. Li

Angles vs. Devil - Two Pictures of David X. Li

A couple of days ago when I was talking with a good friend in Beijing, I was told a Chinese quant who created “the first CDO model” is serving at CCIC. I thought that this was only a joke… Chinese returnees always want to exaggerate  what he did in the United State, and Chinese respects authorities, like China’s commercial banking industry always have a slogan – ...

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Code collection of KMV Merton model

Code collection of KMV Merton model

Probability of Default (PD) is one of the most important metrics in modern banking industry to manage their economic capital. The so-called KMV default forecasting model is one of these models based on Merton's bond pricing concept and is developed by the KMV Corporation. Nowadays, this model has been intensively used by rating agencies such as Moody's ratings. In this post, I collected some program code/scripts ...

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Using duration gap model to hedge interest rate risk

Using duration gap model to hedge interest rate risk

Duration gap model is a traditional method that is porpularly utilized in treasury and fixed income management. The duration gap model is defined as D*A-D*L*PL/PA Where D*A is the modified duration of the assets of the book and D*L is the modified duration of the liability. PL and PA is the market value (Mark-to-market value) of the liability and assets. For example, assuming a company has the following asset ...

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Basic question on risk management - Non-Quantminds point of view

Basic question on risk management - Non-Quantminds point of view

I read a hot post on bbs at Pinggu.org the other day. Please follow this link from here. It was talking about the author's horrible experience during an telephone interview with a buy-side fund in mainland China.  The author has very strong background in risk management (e.g., China's top university graduates; years working research experience in a head office of a commercial bank; years hands-on experiences in assets ...

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Recent Articles

Yield cycle in line with baby boomers

Yield cycle in line with baby boomers

Chart courtesy of McClennan Publications Tom McClellan, Editor of The McClellan Market Report posted a very compelling chart and analysis on mcoscillator.com. It shows that the interest rate cycle has been in line with the appetite of investment of baby boomers from 1950s. From gold to tech equities, from tech equities to real estate, and from [...]

Large is good: a risk management examination

Large is good: a risk management examination

In the era of post financial crisis, how the system so-called "Too big to fail" works?  A rule of thumb is "Large is good "…  Here is an intuitive reason from GARP's newletter today: "Large banks earn billions, small banks struggle" U.S. banks are making money again, although a split picture of the industry has [...]

“The web is dead” – follow up interview

“The web is dead” – follow up interview

Earlier this month, my friend  Yunwei posted his thoughts on the article by Chris Anderson and Michael Wolff on Wired, The Web is Dead. Long Live the Internet.  In this piece, they argued that simpler apps are quickly replacing the web browsers that we have used for many years. A lot people, including my friend [...]

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