Friday, 7 November 2014

Talk : A Defence of the Monte Carlo Simulation

Interesting Cafe Sci talk recently by Dr Nira Chamberlain on the "Monte Carlo" Simulation and how, in Dr Chamberlains view, it had been unfairly blamed for the 2008 financial crisis. This post is based on the talk, with a little extra linkage thrown in.

Dr Chamberlain is a professional mathematician, has been named as one of the UK's 100 leading practical scientists, and is an advocate for mathematics (see also here).

The Monte Carlo simulation is a way of solving mathematical problems by taking multiple random samples rather than trying to "calculate" the answer. For example, rather than trying to calculate the average time to complete a maze, say, a Monte Carlo Simulation would repeatedly try to go through a maze, taking random decisions at each junction, and see how how long it took, on average, to get to the other side.

Perhaps the first use of a Monte Carlo simulation was by French polymath Pierre-Simon Laplace, who used it to estimate the value of pi.

But it was only with the advent of electronic computers, which could quickly perform many thousands of calculations, that Monte Carlo simulations really came into their own, most famously to help the design of the first nuclear bombs in the Manhatten project. It was here that it was given the name "Monte Carlo Method" as it reminded one of the researchers of gambling behaviour in the famous Monte Carlo casino.

After WW2, Monte Carlo simulations were used in applications ranging from engineering to computational biology

An important use of the Monte Carlo simulation is in financial modelling. Dr Chamberlain explained their use, using the "maze" as an analogy for a financial product. Imagine two traders, Trader A and Trader B...

Trader A to Trader B : Here is a maze, and here is £60million pounds on the table. When the clock starts, you begin the maze and I'll start taking away £1million very minute. If you get through the maze in less than an hour, you keep any money left on the table - but if it takes you MORE than an hour, you have to give me £1million for every minute over an hour that it takes you. Do you want to take this bet? (optional evil laugh here)

Trader B (thinks) : The question I need to know the answer to, right now, is how long it takes on average to get through the maze.

And this is where the Monte Carlo simulation comes in. The simulation will have many attempts to get through the maze, and the results are likely for form some kind of frequency distribution like this :


That is all well and good - the problem comes if, in real life the maze is more complicated than the one in the simulation, and the probability distribution is actually like this :


Dr Chamberlain explained that this mismatch between theory and the real world is exactly what happened to financial models in the wake of the 2008 sub-prime defaults, and was a big factor in the resulting financial crisis.

And, worse that this, when the trades lost money the traders thought they had just been unlucky (because their simulation was wrong), so bet again...and again.

Dr Chamberlain commented that JP Morgan had released the Monte Carlo method to the financial marketplace in 1992 [as part of their RiskMetrics methodology] but, in doing so they failed to adequately warn the market about some of the dangers in using the method. The 2008 crisis left many wondering whether Monte Carlo simulations were to blame. Dr Chamberlain gave examples such as an article entitled "Is Financial Monte Carlo Simulation Dead"

However, as suggested in the talks title - Dr Chamberlain was here to defend the Monte Carlo method, and felt that the problem was more to do with poor inputs and assumptions rather than the method itself, commenting that :

i) When the underlying conditions change, so should the assumptions in any relevant Monte Carlo simulations.

ii) A crisis similar had previously occurred in 1998, when LTCM went bust having lost $4.6billion due to the Russian and Far Eastern economic crises distorting the market. [BFTF notes that LTCM was dripping with Economics Nobel Prize winners and that the subsequently bought out company went bust again in 2009].

iii) The market had been warned about the risks of unexpected marked events, for example in the Black Swan theory and in a paper presented at the International Congress of Mathematicians 2002

iv) The Winner Effect, where testosterone fuels increasingly risky trading behaviour.

Saturday, 25 October 2014

Four Mosques

A blog charting the response received when emailing four local mosques to suggest (very simple) things they could do to improve engagement between the Muslim community and wider society, or ways people could act to stop conflict and injustice.

Before reading this post, you may wish to have a look at the more positive stories shown in :

i) Positive Muslim Stories
ii) Stuff what the Imam said

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Sep 2014 :
"I've written a couple of emails to DEFRA challenging them on their failure to meet their own tree planting targets in recent years. And also on their failure to put into place a structure to protect the Nations ancient woodland, in trust, for future generations - something the Government promised to do back in 2013. With protection of the environment in general and trees in particular, being so prominent in Islam I wanted to suggest that perhaps your respective masajid could encourage the congregations to also be active in this area.

Details and background can be found here.

It is my strong belief that one factor in the alienation of young Muslims is that, in general, Muslim organisations do not provide practical examples (that the organisations have taken themselves) of how to engage with society, to achieve change, to challenge the government etc.And this lack of examples leaves young people frustrated, vulnerable to conspiracy theories and believing they are powerless. This is not a good thing."

Response : None

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Jul 2014 :
"Can you please advise which organisations (e.g. local MP, Arab League, EU etc) I should pressure to act to stop the killing in Syria and, if you have a view, what actions you think those organisations should take?"

Response : None

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May 2014

"This Friday, could you please, please, please mention the May Fest event at the University of Nottingham (Sat 10th May, 11am to 5pm) to your congregation and encourage them to take advantage of this free day of fun and education! It really is a great day out for all the family - and a wonderful chance to talk to researchers at the UoN about what they do. Lots of fun activities for kids and adults alike. You will not be disappointed inshallah. We talk, as a community about our committment to learning and the Islamic heritage of science - well here is a chance to demonstrate that we stil have that love of knowledge today. More info here: and here.

Response : One response from an Imam who said "Inshallah will spread the news...and will also try and come down"

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Friday, 24 October 2014

Talk - Uri Gordon on Anarchism

Interesting Cafe Sci talk recently by Uri Gordon on Anarchist Politics. This post is based on the talk, with a little extra linkage thrown in.

Uri stated that in contrast to MONarchy (one leader), the ideal behind ANarchy was to be free of rulers, and that the anarchy did not mean chaos, insecurity etc

Uri asked the audience to consider the many occasions at work and at leisure when people organised themselves without the need for leaders (e.g. going to the pub for lunch, a walk in the country, a charitable venture, a community garden etc, adding that "Humans can get along just fine without rulers" and that perceptions to the contrary were pushed by interests such as the state, patriarchal institutions, corporations who wish to exploit etc.

As an example of how anarchy can work in communities, Uri gave the example of aboriginal hunter-gatherer communities around the world, who have been found to have structures that do not have a leader, have cultural codes that look after the environment. They respect their elders - but all members of the community get this respect when they become old. However, Uri later added that this model could not work in todays world as there were too many people and the environment was too degraded.

According to Uri, anarchists seek to build a new society within the current one rather than being co-opted into existing power structures via conventional elections etc.


A protest by the Spanish anarchist trade union CGT,
who represent some 2 million workers

Anarchists also believe in direct action, without relying on intermediaries - hence movements such as Occupy, the Brazilian World Cup protests, the emergence of community gardens in run down areas, and cases of people tying themselves to trees to prevent construction projects.

(although a darker side of direct action can be seen in this article). Related to this is the concept of the "Propaganda of the Deed".

Uri also mentioned that he had a very pragmatic approach to anarchism, and little time for those who put the purity of the ideology over the practicalities of actually helping people and achieving social good. He also cautioned against conspiracy theories as "lazy thinking".
Uri also gave some pointers for further reading:

Emma Goldman (who Uri quoted from).

African Anarchism - The History of a Movement

Decolonising Anarchism

Tom Payne - Common Sense

Incidentally, researching for this post has revealed to BFTF the existence of the rather lovely anarchist phenomena of "Twinkles"

Image Sources
CGT

Wednesday, 22 October 2014

Camping near Clipstone

At No3 sons repeated exhortation, spent a weekend camping in Nottinghamshire this September. Took the opportunity to have a look at the (now disused) Clipstone colliery....

The Clipstone Colliery, , produced coal from 1927 until 1993, and then again from 1994 to 2003. The imposing headstocks were amongst the tallest in Europe when built during upgrades in the 1950s and were given Grade II listed status by English Heritage in 2000 as being ‘special architectural or historic interest’.

The site is currently owned by Welbeck Estate, who would like to demolish the headstocks - although others are campaigning for the site to become an adventure park including a mile long zip line! (see also www.clipstoneheadstocks.co.uk)

Clipstone Colliery

There is an e-petition to save the headstocks. BFTF has signed it, and hopes you will too.

A history of Clipstone colliery here and some images of the colliery here and here.

Headstocks look like some kind of alien engineering
has been placed in the middle of the village

Meanwhile, next to the campsite was a farm - and BFTF was fascinated to see how quickly the farmer, armed with a tractor and a Lemken Solitaire 9 seed drill, was able to plant an entire field with seeds.

It left BFTF wondering if there was any information quantifying the impact of mechanisation on farming productivity

Mechanisation of seed planting

Amazing how quickly the whole field was planted

The best thing about camping, it seems, is cooking on a gas stove !

No3 Son made the dinner, bless him!

Tuesday, 21 October 2014

Top Trumps "Warships"

Whilst playing a game of "Warships" Top Trumps with No3 son, noticed that all the cards had little complimentary descriptions of their respective vessels (which were from the navies of nations ranging from the US to Italy to China).

Well, all the cards except one - the single entry for the Pakistan Navy (PNS Khaibar) was very disparaging. BFTF is struggling a bit to understand why...

The Cards (might be a couple missing)

Uniquely disparaging comments on the PNS Khaibar card

Title Card

A very rare Bourbon Cream

To eat or to sell on eBay? That is the question.

Actually, that is no question at all. Nom Nom Nom.

From one side, a perfectly normal Bourbon Cream....

..but from the other side, the biscuit is inverted -  a monstrous aberration.

A "Thank You" to the teachers at Berridge Primary

Been going through the stuff No3 son brought home on his last day at Berridge Primary School and was struck by how his writing improved over the time he was at the school.

So, this post is a big THANK YOU to the teachers there for working so hard to teach No3 Son literacy, numeracy and much else - and to a pretty good standard too!

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