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Tuesday, 27 September 2011

Financial Crisis: Calculating the Probability of Extreme Events

Cumulative distribution and probability densit...Image via Wikipedia



ScienceDaily (Sep. 26, 2011) — It had to happen: the property bubble burst and the global financial market experienced its biggest crisis in the last hundred years. In retrospect, many suspected it was coming, but nobody could have known for sure. The traditional investment strategy failed, as all forms of investment suddenly collapsed at the same time. In order to calculate the probability of several such extreme events occurring at the same time, three scientists at the RUB have developed a new method. Prof. Dr. Holger Dette, Dr. Axel Bücher und Dr. Stanislav Volgushev from the Institute of Statistics (Faculty of Mathematics at the Ruhr-Universität) published their findings in the scientific journal The Annals of Statistics

Big things start small

Up to now, when statisticians estimated the probabilities of extreme events, they usually calculated with dependencies between the outliers of statistical series. The outliers, however, make up the smallest part of a data set, e.g. the largest 100 out of 3,600 data. That means they ignore the dependencies of the bulk of the relevant data set, namely 3,500 data, and thus take the risk that important information is lost. Axel Bücher shows how this problem can be solved: "Our work provides a decision aid as to whether it is better to use the full range of data and not only the outliers. If all the data are relevant, then they should all be included. However, this is not always the case. Sometimes these data would falsify the result."



Multidimensional function

The researchers use the copula function for the evaluation. "This is a complicated, multi-dimensional function, which characterises stochastic dependencies between the data" explains Stanislav Volgushev. With this aid, a few years ago we might have noticed that many little termites were nibbling their way into the wooden foundation of the global financial market, whilst we were on the look out for large predators.

Financial crises as motivation for research

"Our research is strongly motivated by the recent financial crises. At that time, almost all the economic models and forecasting tools for loan losses failed because they did not pay sufficient attention to extreme dependencies. In the long run, we aim to develop models and methods that predict such events better" says Prof. Dette, explaining the reason for their research. For several years, the three researchers have been looking into new methods of asymptotic statistics which work with sample sizes approaching infinity. They are financed by the German Research Foundation (DFG) in the Collaborative Research Centre SFB 823 "Statistical modelling of nonlinear dynamic processes." The English-language publication bears the title "New estimators of the Pickands dependence function and a test for extreme-value dependence."

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Monday, 26 September 2011

How To Kick Innovation Up a Notch to Nanovation?






Martin Zwilling, Contributor;
Image via Wikipedia

What sparks paradigm-shifting innovation in any business? It’s a special mix of entrepreneur and company, regular in every respect except for having the courage and foresight to make an idea happen that was supposed to be impossible. As an entrepreneur in a startup, how do you know if you have this potential, and what are the steps to get from an innovation to a revolution?

The first step is to meditate on the examples set by others, like Steve Jobs of Apple, Jeff Bezos of Amazon, or Thomas Edison with the electric light. There are many others, like the one I just finished about Ratan Tata bringing out the Nano car in 2009 in India for less than $2,500. The book is called “Nanovation,” by Kevin & Jackie Freiberg.



These authors have studied many such examples, and summarize my own perspective on the characteristics of entrepreneurs they call “nanovators,” that produce true, life-changing innovations, which they call nanovations:
  1. Get wired for nanovation. We all agree that innovation is an adventure into the unknown. If you want people to follow, you need to be able to convince them of three things: (1) your mission is worth supporting, (2) you have the competence to build a critical mass, and (3) you have integrity to look out for their best interests along the way.
  2. Lead the revolution. Nanovators have more than the vision; they have the drive to lead, and the focus to stay on target. They are wired to win. Organizations don’t produce game-changing innovations; people do. They allow a leap of faith in their own ideas, as well as in the ideas and capabilities of their team.
  3. Build a culture of innovation. You need a culture where restlessness is tolerated, curiosity is encouraged, passion is inspired, creativity is expected, and people are always talking about what’s next. Ultimately, the mind-set changes so significantly that innovation is natural, and no one is conscious of it.
  4. Question the unquestionable. Outsiders ask a lot of questions because they don’t presume to know why something is done a certain way. Make your insiders think like outsiders. Provocative questions like “What if?”, “Why not?”, or “So what?” can help to get everyone outside the box.
  5. Look beyond customer imagination. First-of-a-kind products empower customers to do things they didn’t even know they wanted to do, and now can’t live without them. The computer mouse, Tivo, and Teflon are examples. Listen to customers, but remember that they can’t always tell you what they don’t know.
  6. Go to the intersection of trends. Nanovators pay close attention to the early warning signs that precede major cultural, societal, and market shifts. Where most people see an isolated trend, nanovators connect the dots by relating one trend to several others. They focus on next practices, versus best practices.
  7. Solve a problem that matters. The key here is to resist the temptation to pay more attention to the technology solution than the problem. Some people create brilliant solutions to non-existent problems, like maybe Segway and satellite phones. These solutions may be nice to have, but won’t ignite a revolution to get there.
  8. Risk more, fail faster, and bounce back stronger. When you pursue a creative idea that takes you beyond, fear tempts you to make compromises. If you can push through this fear and doubt, or bounce back intelligently from initial setbacks, you often arrive at something that has truly never been seen before.
Jeffrey Immelt of General Electric argues that the next big thing, like the Nano, could well be from “reverse innovation,” where instead of industrialized nations adapting their products for emerging markets, innovation in emerging markets will bring new paradigms to home markets. In any case, the future is defined by what we put off until tomorrow, so don’t wait too long to get started.

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Customer Service with a Snarl !





Service with a snarl

But Then Again By Mary Schneider

Gone are the days when you can expect politeness and pleasant smiles from your friendly customer service troops.

WHAT’S happening to customer service these days? I feel as if I’m constantly battling with technical support staff and frontline personnel who are becoming more and more rude and inept at their jobs.

Take the other day, for example, when I woke up to find that my car battery was as dead as Paris Hilton’s singing career, forcing me to seek out my nearest car repair shop to get it charged.

As I entered the premises, I was met by a manageress who looked as if she had a lemon stuck to the roof of her mouth. Rather than welcoming my business, she was surly and brusque to the point of rudeness.

Four hours later, when I called to find out how the battery charging was progressing, the Dragon Lady told me, somewhat haughtily, that I had to be patient. Later still, when I called again for another update, she breathed fire down the line and gave me the impression that I was harassing her.

The following morning, a baby-faced mechanic showed up at my house with my super-charged battery, a few tools and a packet of cigarettes.

“Surely, re-installing my battery won’t take so long that you need to have a cigarette break,” I wanted to say, but didn’t.

As he fiddled with the battery, I glanced at the packet of cigarettes lying on my doorstep. The front of the packet had a picture of what looked like a premature baby with an oxygen mask strapped to its tiny face.

“Look what cigarettes can do to unborn babies!” I wanted to say to the young man working beneath my bonnet, but didn’t.

You’d think that someone so youthful and agile would be able to install that battery before you could finish saying: “Did you know that Paris Hilton once cut a record?” But this chap redefined the word “slow”.



I watched impatiently as he attempted to connect the cables to the battery terminals using a spanner that was too big to get the job done – for a full 10 minutes.

Then he turned to me and said: “Do you have a size 10 spanner? I forgot mine.”

Like who did he think I was? The Fix-it Queen? His question would be tantamount to a cardiologist asking his patient if she happened to have a bypass machine in her overnight bag, just before administering the anaesthetic for her heart transplant surgery.

Nonetheless, I did have such a spanner conveniently stashed in a drawer by the front door – where I’d left it after removing the battery the day before. I produced it with a flourish, expecting Babyface to be surprised. But he took it from me as if it were the most normal thing in the world.

After connecting the cables, he spent a gazillion years trying to clamp the battery into place. As I watched him, entire species of animals became extinct, thousands of babies were born (some of them looking like the picture on the cigarette box), continental plates grunted and groaned, and stock markets around the world plunged ever deeper into crisis.

When his slothfulness became unbearable to watch, I withdrew into the living room and began writing a list of things that I needed to do as soon as I was mobile again.

No sooner had I written the first item (get recommendations for a new service centre) when Babyface poked his head around the door and asked for my car key.

Now, my car has two keys. One for the alarm system, and the other for the ignition. How was I to know that he wouldn’t know his arse from his elbow and would attempt to start the car with the wrong key, causing the alarm to go into “let’s disturb the entire neighbourhood” mode.

At this stage I was so agitated, that I took the key from his nicotine stained hand and said, in a somewhat irritated tone: “What have you done?”

He responded by uttering the four words that are guaranteed to make me more agitated: “Now please calm down!”

Ten minutes later, as he was slipping the premature baby into his back pocket, he turned to me and said: “My boss sent me here because I am the only one who can speak English. I usually work with Japanese cars, which are very complicated. Malaysian cars like your Proton Waja are very simple, but I don’t know how to repair them.”

I didn’t know whether to laugh, cry or feel sorry for him.

But I do know where not to go if I have a flat battery in the future.

Check out Mary on Facebook at www.facebook.com/mary.schneider.writer. Reader response can be directed to star2@thestar.com.my.

Sunday, 25 September 2011

The need to be assertive

Project Management InstituteImage by craig.martell via Flickr



LET'S COMMUNIC8 By ALEX CUMMINS

One should be allowed to say ‘no’ and make a stand on an issue without feeling guilty or harassed.

RECENTLY, I met a female friend in Putrajaya who looked upset. I then decided to take her out for coffeee to find out the cause of her worries and stress.

My friend then confessed that she was unable to bring herself to tell a male member of her team that his sexist remarks to female team-mates were hurtful and that he should refrain from doing so.

I told her to be assertive and that she should tell him that such negative remarks should stop immediately.

“I am a woman and women aren’t like that,” she responded.

Since she is of a gentle, passive nature, I offered her some tips on being assertive and how it could help improve confidence and self-esteem.

Assertiveness is about having the confidence to have your say, to live your life without resorting to passive, aggressive or even manipulative behaviour.

It’s also about being not afraid to state your own needs while listening to the views of the other person, which in turn boosts your confidence and self-esteem.

A complicating factor in all this is about an individual’s childhood and culture.

For example, people who grew up with very strict parents and dominant older siblings may be less assertive.

Also, certain cultural values in which stereotypical behaviour of submissiveness, especially amongst girls, is bound to make behaviour at the work place more challenging.

However in some instances, whatever one’s childhood or cultural background, passive or aggressive behaviour may be a means of achieving their desired goals and it comes naturally.

Just observe some men who yell or women who sulk, or vice versa!

Assertiveness is a better option for desired outcomes because unlike the emotional basis of passive or aggressive behaviour, it is rooted in thinking and planning.



It is a savvy assessment of your needs and feelings in the light of practicalities, and the other person’s position. It can be learnt and is appropriate for men and women. It is also sensitive to different cultural values.

Assertiveness is also based on “rights”. They include the treatment of other people as equals, regardless of gender, race, age, disability or status.

Being assertive also means that one is able to to ask for what he wants, and to be listened to seriously. An individual should also be allowed to have this own opinions and to say “no” without feeling guilty and to change his mind and to hold to his own values.

As an exercise in self esteem-building, try saying out loud to your reflection in a mirror that you can do and carry out the tasks that worry you.

Keep telling yourself that, “I can do statistical work” or “I will make a good presentation”.

Do this several times a day. It does help, especially when you support confidence-building with practical steps like reading a book on basic statistics or on presentation skills. Situations that require assertiveness are usually stressful.

Fortunately, there is a simple exercise which will help relieve physical symptoms of stress like a rapidly-beating heart, sweaty palms or even a high-piched voice.

Before meeting the other party, press both palms of your hands together with the fingers pointing upwards and your forearms horizontal, until you feel the pressure in the heels of the palms and under your arms.

Breathe in and out slowly through a slightly open mouth, tightening the muscles between the ribs as you exhale and then relaxing them before you start the inhalation. Do three or four repetitions. It works.

If you read a previous article on body language you will remember that your body cues must match your words.

Adopt a relaxed stance, have good eye contact; hold your arms loosely at your sides or in your lap if seated; face tand lean slightly towards the other person.

Speak at normal conversational volume. Try to end with a smile.

The language of assertiveness is clear, direct and concise. This is about you: what you feel and want.

It is essential to use language appropriate to the person you are talking to, and not fall back on vocabulary, concepts or jargon beyond the other person’s understanding.

Assertiveness is not about superiority or cleverness.

“Should” and “could” are words to be used with caution when you want to be assertive.

“Could you do that for me?” “Could I ask for time off for all that overtime I worked?” “You should stop making sexist remarks!”

They create confusion to the listener about the legitimacy of your request.

The assertive wording would be “Please do that”; “I would like time off ….”; “Stop making….”

“Hope” is another word which interferes with your choices. You chose to work late because you can and want to. “I hope I can work late” implies doubt.

Assertiveness is thinking and speaking positively with confidence. It’s also about an honest evaluation of the situation and the other person and his/her opinions and needs before you even raise an issue. Is compromise possible? Are there personal considerations with the other person that need to be taken into account?

Avoid implied character criticism. “Please do/do not do something” is clear but neutral. “Why can’t you just do/not do…” implies a criticism of a specific character rather than a specific task in hand.

If what you ask for creates strong emotion in the other person, acknowledge this with a defusing statement such as: “I see you are unhappy with what I have just said, but I think it’s important for you to know my position and for us to have an open chat about it”.

Recognising the other person’s opinion is another good way of keeping the situation on an even keel: “I understand what you are saying BUT…..”.

Never use antagonistic phrases like: “Let me repeat”, “Are you listening?” or “Don’t interrupt”. And criticism without suggesting a solution is irrelevant and not at all helpful.

If you are in the position of having to apologise for a mistake, do it once, not repeatedly.

Be specific about why things went wrong. Don’t over-elaborate. Everyone makes a mistake now and then, even the boss.

Criticising a colleague is tough. But it will win you respect in the long run provided you do so in private and are fair, firm and specific.

Try and thank the other person if possible at the end of the conversation.

Thank you for giving me the time to talk about this” or “I’m glad you understand”. Such statement will make both of you feel better.

Assertiveness is a way of life. It won’t always bring you a happy outcome.

However, it will make you comfortable with yourself and generate respect amongst colleagues and friends.

By the way, it may interest you to know that my friend feels a lot better now after being successful in putting an end to the sexist remarks in her office!

Alex Cummins is a trainer with the Professional Development Unit of the Brtish Council in Kuala Lumpur.

Rumblings of change

Map showing ASEAN member states Legend ██ ASEA...Image via Wikipedia



By BUNN NAGARA


With the fast-rising giant that is today’s China, few established things can be assumed to be the same.

EVENTS that have become established through routine tend not to create a fuss, whatever the contentious issue may be.

However, when routine events produce surprising results, the implications may multiply exponentially. Such is the case with annual US arms sales to Taiwan, and China’s angry reactions to them.

Even though different years may see different combinations of disagreements between Beijing and Washington, the arms sales drama played out between the two capitals over a largely silent Taipei is an annual soap opera worth noting for the scale of its implications.

US plans to sell Taiwan US$6.4bil (RM20.3bil) of weapons last year strained relations between Beijing and Washington badly. Not only was this the largest amount in nearly 20 years, it came together with several other disagreements at the time.

The result was that Beijing suspended military relations with the US from January, besides considering sanctions against private US arms makers involved. The sale was a left-over from the preceding Bush administration’s policy that the Obama White House had tried to usher through.

This year it was “arms sales to Taiwan time” in Washington again. Taiwan had asked for a considerable package, but the US had been having second thoughts.

Taipei had sought a range of new weapons including a new fleet of F-16 jet fighters. But this time Washington said no, mindful of Beijing’s ire.

Instead of the new F-16s, Taiwan will instead get US$5.85bil (RM18.5bil) of “upgrades” for its existing fleet. That in turn led to some bipartisan criticism of the Obama administration in Congress.

Interestingly, Taiwan did not complain about the downgraded weapons sales. Instead it officially congratulated Washington for “going ahead” with its arms sales programme, all too aware of its weak position in the strategic triangle.

For China, any US military aid to Taiwan is still military assistance that could be used to attack the mainland, so Beijing protested all the same. But the atmosphere this time has become less antagonistic.

Just as the US had said no to Taiwan, albeit within limits, China’s protests were largely limited to news media commentaries and defence establishment statements. Both the US and China have come to a new understanding of each other’s concerns and their mutual interests.

Chinese Foreign Minister Yang Jiechi assured US businessmen in New York that bilateral relations would continue to grow, right after asking Washington to stop the jet upgrades. Those upgrades were not going to stop, especially when they were already a softer alternative to the full-blown sale of new F-16s, and China seemed satisfied enough with that.



Military might

The other issues at stake this year include China’s own military development, of which China watchers in the US are taking due note. However, a more significant factor for the US is a possible run on the dollar given that so much of US wealth, and loans, lies in China’s hands.

For its part, China is arranging for its next president, Xi Jinping, to visit Washington later this year. That means no souring of relations with the US is to be advised.

The US itself is gearing up for a presidential election next year. Washington is therefore understandably on its toes for now in regard to its relations with a fast-rising China.

All of this seems to leave some of the smaller countries in East Asia somewhat disoriented. Accustomed to US military and diplomatic dominance in the region for more than half a century, any sign of the US receding into the Pacific distance can be disconcerting for them.

This applies particularly to those countries that had hosted US military bases for decades.

Two days ago, the Philippines tried to form an Asean front by establishing a panel of legal experts in dealing with China’s claim over disputed islands in the South China Sea. The government of President Benigno Aquino III has consistently been active on this issue, notwithstanding the limited response it has received.

One reason for the apparent lack of Asean enthusiasm for Aquino’s plans is that he is trying to tackle a huge and long-established issue as Asean’s youngest leader with no clear direction.

Another reason is that Manila is sending confusing if not also conflicting signals over the issue. Last week the Philippines announced that Aquino would bring the issue of the disputed islands to Japan on his visit to Tokyo.

Japan has no involvement with claims to disputed islands in the South China Sea, although like the Philippines and Taiwan it has a security arrangement with the United States. Those arrangements vary in their terms and degree of US obligations, so taken together they are asymmetrical and non-comparable.

There is a sense in Asean that if disputes within Asean have yet to be solved within and by Asean, they are unlikely to be solved outside Asean.

To compound the confusion further, President Aquino was in Beijing from late last month to early this month soliciting for Chinese investment in the Philippines. From 2009 to 2010, bilateral trade grew more than 35%.

Aquino then said the trade was mostly in China’s favour, and he would like to balance it. He is more likely to succeed there than in competing claims over territory.

A current strand of opinion among US strategic thinkers is that the Philippines is beginning to see China as a “big brother” substitute for the US in East Asia. But given Manila’s actions and policies so far, nobody is likely to know what the Philippines wants to do, least of all Filipino lawmakers themselves.