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It's a serious question. I am not trying to insult you or make fun of you or anything of the sort, sambian. I am trying to illustrate a point.

Hahaha, let's not count our chickens yet, shall we? Lemme ask you now a slightly personal question, sambian. How much are you worth, in total? Also, you'll have to forgive me, 'cause I might have to leave soon. It's getting late here. However, I promise to return tomorrow, as this turned...

In my view, Greece is a lost cause... There really is nothing that can be done, either by the IMF or the EU. It would be properly like throwing good money after bad. Obviously, then it becomes a dilemma in terms of whether it's still worth doing, given the probability of another Leh-like...

Nah, it's fine, we don't have to actually play... Let's just agree the terms of the game, shall we? Here's what I propose: 1) Player starts with initial capital X 2) Player tosses a fair coin 3) If it's heads, player's capital goes to 2X; if it's tails, player's capital goes to 0.5X...

There you go, right from the Fed: http://www.federalreserve.gov/releases/h15/data.htm

Great, let's do it... Am I flipping the coin or yourself?

As I mentioned in another thread, this is a truly excellent comment on Greece (from the former IMF Chief Eco): http://baselinescenario.com/2010/04/06/greece-and-the-fatal-flaw-in-an-imf-rescue/

sambian, sorry... I was very busy, but now back. Shall we play our game? I am ready to go when you are.

sambian, we shall play the game, let's first make sure we have an explicit understanding... Firstly, can you make sure you understand the notion of "logarithmic return"? Just like arithmetic return, t's a quantity that's expressed in percentage terms... Secondly, can you confirm that, in...

Who said my formulas are newly created? I just used the simple formula for logarithmic returns, which is, in fact, in all the schoolbooks. [B] But now you're contradicting your own assumptions by offering me a game that violates your own random walk definitions. Remember that the B&S paper...

I don't really understand, what do you mean? You just need a list of bond futures that are traded arnd the world?

In my view, the problem is as follows, sambian. You have to be consistent between your distribution assumption and the method of calculating the expected return. So you can use either, but not both, of the two following cases: 1) Assume the price of eur/usd is normally distributed, in which...

Firstly, sambian, it's a process... I started with a somewhat superficial understanding of what the problem with your calculation was, but, in the end, with the benefit of collective wisdom, I think I can formulate the issue more robustly. Secondly, if you actually consider what I am saying...

No, the opposite, if anything... At any rate, there seems to be healthy demand for US treasuries, judging also by the 3y auction today.

Thx, heech... I am just trying to understand if I am missing something basic here.

But that's not the way sambian calculates expected returns for his strategy... My point is that his process assumption is inconsistent with the way he calculates expectation.

Correct... But doesn't sambian make an explicit assumption that it's eur/usd, rather than log(eur/usd), that's a random walk? Isn't that fundamentally how he arrives at the conclusion that E[...] > 0?

BTW, I'd like to recommend this really good piece on Greece (you see, Ivan, I am not always negative with respect to other people's work): http://baselinescenario.com/2010/04/06/greece-and-the-fatal-flaw-in-an-imf-rescue/

Sorry, sambian, I wish to clarify, if I may... Your error is in the very first sentence above. What you're defining as a "random walk" simply isn't. Specifically, the concept you're trying to operate with, the symmetric ordinary random walk (SORW) is defined as X(t) = X(0) + sum(Z(k))...

I consider this logic wrong, indeed...