Cornucopia of Math

Eclectic recent math-goodness :

Two nice video talks by Terry Tao on Random Matrices and Additive Combinatorics here

A programmers intro to the practical aspects of Flow Graphs at topcoder algorithm tutorials

PCM

Last but not least the superb ‘Princeton Companion to Mathematics‘.

In a nutshell, PCM is a readable survey-guide to modern math by the experts.  Some links –

• The intro page autoplays a podcast interview with Tim Gowers, the editor
• Contents list with some downloadable sample chaptes
  
• Terry Taos many PCM contributions are discussed/previewed at his blog
• ‘Mathematics and Money’ chapter apparently has an intro to Quantitative Finance by Mark Joshi
• ‘Numerical Analysis’ sample chapter mentions John Butcher, a great ex prof from Auckland Uni.

Should be in print Nov 2008.  Hopefully more articles from Tim Gowers’ and Terry Tao’s blogs will make it out in book form, with the momentum this will generate…

Slide talk – “Libor Market Models : the reasons behind the success”

I found some very interesting (promo?) slides from SocieteGenerale discussing WHY the Libor Market Model LMM [aka BGM/J, an instance of HJM] has become so popular, despite its significant imperfections.

But are we fooling ourselves that we can still put “the wrong number in the wrong formula to get the right price”?

I think they miss the point, basically you need some parameters to make a good model fit the environment [to paraphrase Dermans definition of useful ‘model’ is that it allows you to price something from other, somehow related, market observables].  Sure, you need several parameters to get enough flexibility to calibrate to the market.