Using Markov Chains to Model Mortgage Defaults in R

The goal of this post is to blend the material I've been learning in my night class with my day-job and R.If we have some object that switches between states over time according to fixed probabilities, we can model the long-term behavior of this object using Markov chains*.A good example is a mortgage. At any … Continue reading Using Markov Chains to Model Mortgage Defaults in R

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Using Stochastic Process Simulations to Forecast Stocks

I good alternative to using historical volatility to forecast 35 weeks ahead may be to use an implied volatility from the options market. The market price of the option contract that expires 35 weeks later can be used to "reverse-engineer" the market's expected volatility over the forecast period. This may be the subject of my … Continue reading Using Stochastic Process Simulations to Forecast Stocks

The Unstarvable Beast: The Need for more Effective Government Spending

Revealing article by Harvard’s Kenneth Rogoff linked above… Key Takeaways:  The government operates in the service industry, which generally exhibits slow productivity growth. While productivity growth is slow, the industry is still forced to pay higher wages for relatively the same output because it competes for workers in the same labor market as other, high-productivity … Continue reading The Unstarvable Beast: The Need for more Effective Government Spending