Saturday Links: 6-10 February 2017

Saturday Links: Sunday edition! Yeah, that's right. I didn't get around to writing this yesterday.

How the Flash Crash Trader’s $50 Million Fortune Vanished -- Bloomberg Markets -- Investigative piece on Navinder Singh Sarao's fortune, which is tied up in a complicated web of offshore investments. Sarao, dubbed the "Flash Crash Trader" and "The Hound of Hounslow", was convicted for fraudulent trading in the financial markets. Interestingly, aged almost 40, he lived in and traded from his bedroom in his parents' house. He went on to make roughly $50 million from futures trading. US regulators claim he helped cause the Flash Crash of May 2010. After having been extradited by his home country England and subsequently sent to Chicago, Sarao was ordered to pay $38.4 million to the CFTC and US Justice Department. I'm working on a post about the accusations myself; watch this space for more. I'm not going to defend Sarao's trading strategies, which may have involved an HFT practice called "spoofing", but I think it's ridiculous this matter had to be settled in the US and I must say it's nothing short of embarrassing if one individual trader can break the international financial markets from his bedroom. I mean, if that's really true, how stable and trustworthy can today's automated markets be?!

A Litany of Problems With p-values -- Statistical Thinking -- Informative post about the shortcomings of null hypothesis testing and p-values. Practitioners will find this extremely useful. From personal experience, I can say that null hypothesis testing only looks easy from the outside. It's extremely easy to calculate p-values, after all. Press a button in the statistical software of your choice. But to make educated inferences you should look beyond the numbers and ask yourself whether you would fully trust your statistical tests: If you're testing a potential trading idea, would you put your own money into it?

Saturday Links: 16-20 January 2017

This week I liked three articles/blog posts in particular.

How Deutsche Bank Made a $462 Million Loss Disappear -- Bloomberg Businessweek -- Excellent investigative article shedding light on a dubious 2008 deal between Deutsche Bank and Monte Dei Paschi that threw the Italian private bank into jeopardy and Deutsche into a sustained legal battle.

Taming the Chaebols -- Project Syndicate -- Insightful commentary by Korea University professor Lee Jong-Wha on the power of chaebols, South Korea's large and mostly still family-owned conglomerates. With the impeachment of South Korea's president Park Geun-hye and her government trapped in a web of corruption, this is a timely and interesting read about the connections between the chaebols, including Samsung Electronics (which makes up 20% of the country's GDP), and South Korean politics.

Fundamental Principles of Statistics -- Frank Harrell: Statistical Thinking -- Short blog post by Mr. Harrell listing principles that he follows in his practice of statistics, and which I fully share. If your work entails statistical analysis (and how to communicate the results), you'll most likely agree, too.