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	<title>Comments on: What to contribute (Winter 2008 CSE 484)</title>
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	<link>http://cubist.cs.washington.edu/Security/2007/11/23/what-to-contribute-winter-2008-cse-484/</link>
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	<pubDate>Mon, 06 Oct 2008 14:00:22 +0000</pubDate>
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		<title>By: Robert Arvanitis</title>
		<link>http://cubist.cs.washington.edu/Security/2007/11/23/what-to-contribute-winter-2008-cse-484/#comment-4352</link>
		<dc:creator>Robert Arvanitis</dc:creator>
		<pubDate>Sat, 22 Mar 2008 14:02:58 +0000</pubDate>
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		<description>The security mindset is a subset of a broader mental/intellectual model, which seeks to check for consistencies and especially INconsistencies.

I believe this derives from the multi-player, multi-round game called "Ice Age," when we were all cavemen. In groups of 100 or less, we'd check carefully.  I give you berries now, later you give me nuts. Closed form Prisoners' dilemma where only cooperation survives.  And always remembering your nuts against my berries.

This has important implications.  In the capital markets, for example, we are always looking for inconsistencies. We call these "arbitrage opportunities."  For example, we can arb yen against dollar forward. Or in the US, we can arb debt (tax deductible) against equity (regulation and ratings demand capital) and create hybrid instruments like "surplus notes," which get both tax and regulatory treatment.
Indeed, in finance, no set of rules can stop us if we have enough degrees of freedom.  The economic indicators will never all line up perfectly; something will always pop up and the only question is frictional costs versus value of the arb.
Glad to discuss in detail.</description>
		<content:encoded><![CDATA[<p>The security mindset is a subset of a broader mental/intellectual model, which seeks to check for consistencies and especially INconsistencies.</p>
<p>I believe this derives from the multi-player, multi-round game called &#8220;Ice Age,&#8221; when we were all cavemen. In groups of 100 or less, we&#8217;d check carefully.  I give you berries now, later you give me nuts. Closed form Prisoners&#8217; dilemma where only cooperation survives.  And always remembering your nuts against my berries.</p>
<p>This has important implications.  In the capital markets, for example, we are always looking for inconsistencies. We call these &#8220;arbitrage opportunities.&#8221;  For example, we can arb yen against dollar forward. Or in the US, we can arb debt (tax deductible) against equity (regulation and ratings demand capital) and create hybrid instruments like &#8220;surplus notes,&#8221; which get both tax and regulatory treatment.<br />
Indeed, in finance, no set of rules can stop us if we have enough degrees of freedom.  The economic indicators will never all line up perfectly; something will always pop up and the only question is frictional costs versus value of the arb.<br />
Glad to discuss in detail.</p>
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