Taking EC484 for the LSE EME? Here Are Some Notes.

Before throwing away my notebooks and before I forget everything, I wanted to write down some notes on what I learned throughout the year about EC484, the core econometrics course of the LSE EME MSc. Not that any of my friends who read this blog will need them, but I'm being indexed, and maybe I'll come up on some search results for someone someday.

If you're taking the class and want to check these out, you should take them about as seriously as you would take advice from any of your other classmates, which is not all that seriously. I did write them up in a hurry and over six months after taking the exam. Still, these are the notes that I wish I had had in January, and I honestly think they will help most people taking the course in at least some small way.

Note that they are essentially useless without Professor Robinson's course packs, to which they are essentially just commentary and supplements.

Here they are:
EC484-Giordano Supplemental Notes.pdf

Notebook Pages.

It's hard not to have an emotional attachment to the piles of old notebooks you accumulate in grad school. The handwriting, the mistakes, the sketches, and the order of the notes all tell a long, hazy story legible only to the writer. However, airline luggage weight limits force you to let that attachment go. To soften the loss, I'd like to post some typical pages from the last two years. After posting this, I'll go throw them all away.

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This is a very typical page. I've always thought that math looks pretty when viewed from a short distance away so that the ideas are illegible but the orderliness is not.

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For some reason I developed a special flowery handwriting for all my notes in EC475, my second-year quantitative economics course.

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I have lots of sketches of the backs of peoples' heads.

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Taking Chinese gave the notes for some of the slower-paced classes an extra flourish. I seem to have spent a lot of time practicing Chinese in graph theory.

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By looking at the subjects I was working on and recalling my exam schedule, I can find the first two pages I wrote in my notebook after missing my game theory exam, and they make me proud. Here they are: the core reading list and first problem set from ST422, the time series exam that I thought I might be able study for a week and take instead of the game theory one. In the notebook, there was no fussing and no nonsense: it went straight to what needed to be done. Seeing this makes me feel proud.

Some Recommendations.

I have been meaning for a while to write down some recommendations before leaving England, so here they are.

Regent's Canal East of Camden Town
Starting at Camden Market, you can walk, in a single afternoon, all the way East along the canal until you get to the river, and in the doing see an incredible range of London living, from posh oligarch playhouses to grimy street art with plenty of peculiar pubs to stop at along the way.

Living Lounge Hostel (Lisbon)
If you must leave London, consider going to Lisbon, Portugal, to stay in the best hostel ever of all time, the Living Lounge Hostel. (The same people operate a similar hostel down the street called the Lisbon Lounge, which is why the website has that name.) Idiosyncratic rooms, an artsy lounge, delicious in-house dinner, and jovial hipster staff made us wonder why we were not being charged high-end hotel prices to stay here.

Jeremy Bentham
Don't look it up and don't ask any detailed questions. Just go to the University College of London campus by Russel Square and ask to see him. You will be told where to go.

Monmouth Coffee
If you need good high-quality American style coffee in London, there is only one place to go (well, three, since they have three branches): Monmouth coffee. For two years I went out of my way to buy all my coffee here. They'll even sell you raw beans if you want to tempt the fire alarms in your dorm with a home-roasing project.

Sir John Soane Museum
The walk from the entrance hall to the collection chambers of this free museum near the LSE campus is my idea of what the onset of madness must be like.

Cotswolds Bike Trips
My favorite thing of all to do in England is cycling in the countryside, and there's no better place to do it than the Cotswolds. You can get a train with your bikes from London to the West side (e.g. Cheltenham Spa), cycle to a remote bed and breakfast in the middle using a trusty cycling map, and catch the train back from the other side (e.g. Moreton-on-Marsh). Be forewarned: Google maps is worthless for this kind of thing.

Jamón Ibérico
The best food. I suspect the Spanish may have invented it to piss off the Moors. Occupied by Muslims? What better way to get back at them than developing the most delicious pork the world has ever known?

Nine Elms Market
There's a sort of hidden Sunday market behind the Vauxhall Sainsbury's. It goes by the same name (Nine Elms Market or New Covent Garden Market) as a wholesale early-morning market, but it operates on Sundays until mid-afternoon and doesn't seem to be advertised anywhere. I believe this is the cheapest place to get anything in London. from housewares to giant wheels of cheese to bike parts to giant slabs of bacon to bowls to Dancehall CDs to sugar cane. My friends once bought half a goat there. There's great street food, too. To find it, just follow the crowds disappearing through the gate in the fence behind the Sainsbury's parking lot.

My Blog: #2 For the Flag

My mom and I share a web hosting service, and the bills get delivered to her because she has a fixed address (and I have no money). Recently, she sent me an email to tell me that we had been charged for excess traffic on our shared account. Since our account comes with 15GB per month included, that sounded absurd, and I promised to look into it. A couple weeks later when I actually did, I found that my blog had, indeed, generated over 17GB of traffic in October, almost all of it being people downloading the little American and Kazakhstani flag pictures I have on my site.

Sure enough, if you search for "American Flag" or "Kazakh Flag" on Google images, my website is number two for each of them. (Embarrassingly, both seem to be jpeg, too. Now what did I do that for?) I suppose I got "lucky" and at some early point and had my pictures show up high on the list of image results, and people are usually as happy with one flag picture as with another, so they got clicked on a lot, which reinforced Google's notion of their appropriateness, and now I am serving the two nations flags to the world.

Up till the point where we got this extra bill, the only effect of this was that I would sometimes get emails from junior high students who were doing some sort of internet project and had been told by their teachers that they had to receive permission to use any digital content downloaded from the internet. They would ask me if they could use my flag picture and I would make fun of them (or their teachers), and that was all fine.

But now that I have to pay for that bandwidth (well, for now, my mom is paying, actually, but that will change soon I think) it's less entertaining. And for a while I've been thinking I should sign up for AdSense, Google's website advertising service, to get an idea of what it's like in advance of working there. This provides a perfect excuse to do just that. So as of today, when you visit my old Peace Corps blog you will see ads on the left hand side. Right now it seems to be serving ads for flights to Kazakhstan, which is just fine with me.

I have never wanted to profit financially from my Peace Corps experience, so after defraying my mom's bandwidth bill, I will donate all the proceeds to volunteer small project grants. How am I generating the economic value behind these proceeds? Only through the Miracle of the Internet, about which I am sure to be thinking a lot in the months ahead.

Watch My Hands, Find the Asset.

Recently I spent some time learning about the ABX-HE index, a financial index that tracks the performance of mortgage-backed securities. It is designed, among other things, to improve "transparency" in the market of mortgage backed-securities.

So how is this transparency-improving index calculated? Although the legal contract is available on the website of Markit, the company that calculates and compiles the index, they don't seem to provide a clear and concise description on their website of how this is actually done. So with that caveat, as far as I can gather the index works like this:

- Take a lot of home loans to subprime borrowers
- Package them into bundles, each bundle with its own definition of what a loss on the bundle of mortgages means
- Select twenty such bundles through a voting process by index participants
- Divide each bundle into tranches (with one tranche bearing the first, say, 5% of the losses, the next tranche bearing the next 10%, etc.)
- Take credit default swaps (CDS) on the tranches (that is, a par value contractual obligation to pay in the event of a loss in exchange for a fixed coupon payment)
- Bundle these credit default swaps together to form tranches of the index
- Take the remaining principle weighted average payments on these credit default swap contracts as a floating leg and pay a fixed leg based on the coupon payments at the start of the index
- The index will be 100 minus the amount you would pay to acquire the floating leg of such an average.

So the index is a price-based index of a basket of CDS options on tranches of a bundle of contractually defined losses on subprime mortgages. A long way from the ol' Dow Jones, aren't we?

I Am My Own Little Hoodrat Friend.

It has recently come to my attention that the building I live in consists predominantly of council flats, which is to say, in British parlance, that I live in the Projects. Fortuitously, my friend Matt Zanon has recently sent me a parcel containing, among other things, a copy of N.W.A.'s seminal LP "Straight Outta Compton" featuring Dr. Dre's, Easy E's, Ice Cube's &ct's reminiscences of locales such as mine. Straight out of Compton, are you Doctor? Well, I am straight out of Stockwell.

I have recently made a point when walking around my "hood" (neighborhood) to "bang" (play on my ipod) this album, in case I should have to quickly indicate to any of my "homies" (neighbors) that I too am "ghetto" (live here). To further "drive home" (demonstrate) this point, tonight Sofia, Gertje, Nina, and I will be attending the local Roller Disco, which I understand to be our nexus of "Urban Culture" (city culture). Perhaps while I'm there they will "bang" something by Ghostface Killa and I will grin a knowing grin, for I too am now from the "Projects".

What Is Next.

Of all the jobs that might have been available after finishing LSE, I've been offered one of the best imaginable -- statistician at Google. My future coworkers are great, the work will be a combination of research and practicalities (all undertaken with one of the largest data sets in the history of mankind), and my salary will be at a grown-up level for the first time in four years. I'll be moving to Mountain View the first week of February.

Although I couldn't have hoped for a better job offer, I'm very sorry to be leaving London, which is the coolest place I've ever lived. And of course, it's going to be very hard living away from Sofia. I've asked to delay my start until February in order to have a couple months with her here (her visa runs out at the end of January), and in the mean time I'm working at Macquarie on a temporary contract. With luck, she'll at least be able to come help me move, and I can take a vacation to Buenos Aires next year.

So pretty soon, I'll be putting those old flowers in my hair and heading out to San Fransisco...

What Is Going On.

On the very unlikely chance that you read this but don't communicate directly with me, here is what is going on.

The bad news first: due to my own stupid scheduling error, I missed an exam. In the US, this would mean a resit a week later and possibly a small penalty in the exam grade. In the UK, it means you fail all your courses by default. Fortunately, the school has taken pity on me and will allow me to resit -- in a year's time -- without further censure. As a consequence, I will not officially graduate until next year.

The good news is that all my other marks were distinctions, meaning after I pass my remaining half-credit in 2009, I will have finished the econometrics MSc at the LSE with top marks.

In the meantime, I am working at Macquarie in London as a summer intern, learning about banking and thinking about what to do next.

A New Business.

Sofia tells me that the Argentinian proverb goes "A bird in hand is worth a thousand in the sky".

I think it's time to start a bird-in-hand export business.