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Morgan Stanley Traders Lost $390 Million in One Day in August
- Thread starter ASusilovic
- Start date
Quote from jrlvnv:
Look I am not trying to piss anyone off but in my humble opinion it seems like you want your cake and to eat it also. Ok I feel the problem lies in your brain knowing too much information and fail to realize how simple the problem is. So I'll try and explain for the no so smart.
3 choices a,b,c all picked 100 times comes out the same. We pick one and then take away one. Ok now we have a 50/50 game. Hmmm what just happened. We have a new game now and you want to be payed 2.9 to 1 for a 50/50 game. Well I like those odds also but you fail to see were the problem lies. You run all the numbers you want. You will win 1/2 of the time whether you chose the same or not. Just because you switch from A to C you think something life changing will happen? If you chooce A and we take B out of the equation can we say that B had no part in the equation in the first place?
One last thing before beddy bye time....
If you always choose A and we always remove B do you seriously think you have a advantage on switching to C? If you can answer that question I'll be happy. Now lets take it a step further. Numbers 1-10. You pick a number.... i remove 8 wrong numbers just leaving the one you picked and one other one. You can switch to the other one if you like....... Do you expect to be paid 10-1 odds????? Hmmm don't think so. That would be like playing craps throwing one die and then choose what you want to bet on. First die is a 6.... well load up on the 12 since it pays 31-1..... Kinda of unfair asking someone to pay you 2.9 when its a even money payoff.
One last note. Look some people have a lot less experience in math then others. I post on things I like. I come up with a lot of math questions in a casino and it strikes my curiosity. This post striked my brain and I wanted to learn more about it. I did read the online links provided and saw the little cartoon. Just because I don't agree with it doesn't mean I come here and try and pick fights. Can't anyone have a different opinion even when one is wrong? Well nighty night everyone
Sure you can have another opionion and I would be happy to trade OTC with you if that was possible (well I am actually not sure what kind of credit risk you pose)...
To answer your question. Yes, if you know the cup you remove is indeed not containing the coin then, yes, I would always initially bet on A you always take away the empty one and I would always switch and my odds of winning would double. You cannot always take away cup B because it sometimes contains the coin. The point is you have to take away one of the 2 not chosen cups that does NOT contain the coin. But in general I dont care which cup I initially pick, if you want it to be A be it A.
Quote from faure:
The explanation I liked best was this: Take a 1000 cups with one coin. Choose one cup and the dealer (who knows where the coin is) removes 998 of the cups leaving us with 2 cups. Would it be logical to switch to the cup the dealer didn't take away or do you think you guessed right the first time and your cup has the coin? Hmmm...
Good explanation to show why switch is needed for those who can not understand with 3 cups example, almost typed it myself before seeing this post.
Quote from IluvVol:
The point is that the deal knows BEFORE he choses a cup where there is no coin. So there is an absolute certainty that the dealer will turn over a cup with no coin. Yes, knowlede of where the coin is by the dealer is essential to yield the same result (at least knowledge of at least one cup with no coin that he then turns over).
The story tells you that the cup the dealer turns over does not have the coin underneath it. Whether or not the dealer actually knew in advance that there was no coin underneath it makes no difference to the probabilities involved. So I would say your statement of "the knowledge of where the coin is by the dealer is essenital to yield the same result" is incorrect.
I mean what if the dealer is just very lucky and turns over a cup without a coin. The intent behind the dealer's actions does not change the probability of what happens next.
Quote from sprstpd:
The story tells you that the cup the dealer turns over does not have the coin underneath it. Whether or not the dealer actually knew in advance that there was no coin underneath it makes no difference to the probabilities involved. So I would say your statement of "the knowledge of where the coin is by the dealer is essenital to yield the same result" is incorrect.
I mean what if the dealer is just very lucky and turns over a cup without a coin. The intent behind the dealer's actions does not change the probability of what happens next.
Thats not what I meant. Of course the intent does not make any difference. Fact is the cup taken away must not contain the coin. How I described it was that the dealer knows where there is a coin and where not, otherwise how can he take away a cup that does not contain a coin for certain if he does not know where the coin is. Hope this clarifies...
Wow, stunning logic. So according to you, after removing one cup that does not contain the coin, if you stick with your original guess you have a 1/3 chance of being right but if you switch the other remaining cup you have a 1/2 (50/50) chance of being right?Quote from Hydroblunt:
Look it's simple. When there are 3 cups, it's a 1/3 chance you are right and 2/3 that you are wrong. Once one cup is removed, it's now 50/50 but only so if you actually make the switch. Otherwise, you are really sticking to your old choice which is STILL 1/3 correct, 2/3 incorrect.
Lets see, 1/3+1/2 != 1 ....looks like someone needs remedial math help since the sum of the two remaining choices winning probability must equal 100%.
Yes this is the perfect example for people who dont intuitively get the 3 cup example.Quote from faure:
The explanation I liked best was this: Take a 1000 cups with one coin. Choose one cup and the dealer (who knows where the coin is) removes 998 of the cups leaving us with 2 cups. Would it be logical to switch to the cup the dealer didn't take away or do you think you guessed right the first time and your cup has the coin? Hmmm...
You did neglect to mention the important fact that the 998 cups that the dealer removes are guaranteed to not contain the coin - otherwise the act of removing the 998 cups is pointless. That is the reason that the odds of the remaining cup having the coin is so strong and why switching from your original choice is the correct answer.
The has been an interesting thread. We've established that certain individuals
(1) Have no understanding of conditional probabilities
(2) Cannot distinguish between probabilities and expectations.
(3) No idea what statistics is.
(4) No idea what trading is.
(5) No concept of analytical skills, nevermind possessing them.
Puts their others posts in a certain light, no?
(1) Have no understanding of conditional probabilities
(2) Cannot distinguish between probabilities and expectations.
(3) No idea what statistics is.
(4) No idea what trading is.
(5) No concept of analytical skills, nevermind possessing them.
Puts their others posts in a certain light, no?
guys, I think most of you misundersood me.. I probably didn't explain myself well.
IluvVol, you're pretty rude, this is why I don't post much here lot of people like you here. And why would I bother making that story up?
anyways,
The answer to the cup question is of course that you should switch - I mathematically gave a clear answer why in my first post. anyone with basic understanding of probability understands why.
What I was arguing on this is that this does not necessarily hold true IN THE MARKET. Let me give you an example:
consider 3 stocks: A, B, C and u want to go long on one.
now consider you buy A on day 1, and assume on day 2 price of A and B rise and C falls. would you switch to B?
Presenting the cup probability argument as a approach to trading strategy is not perfectly practical. In fact most traders with experience may even double UP on A rather than switching.
hope that makes sense..
IluvVol, you're pretty rude, this is why I don't post much here lot of people like you here. And why would I bother making that story up?
anyways,
The answer to the cup question is of course that you should switch - I mathematically gave a clear answer why in my first post. anyone with basic understanding of probability understands why.
What I was arguing on this is that this does not necessarily hold true IN THE MARKET. Let me give you an example:
consider 3 stocks: A, B, C and u want to go long on one.
now consider you buy A on day 1, and assume on day 2 price of A and B rise and C falls. would you switch to B?
Presenting the cup probability argument as a approach to trading strategy is not perfectly practical. In fact most traders with experience may even double UP on A rather than switching.
hope that makes sense..
Actually, that's not what you said, I suggest you re-read what you actually said.Quote from Batman28:
The answer to the cup question is of course that you should switch - I mathematically gave a clear answer why in my first post. anyone with basic understanding of probability understands why.
The interview question you gave in your first post has nothing to do with the markets or stocks.Quote from Batman28:
What I was arguing on this is that this does not necessarily hold true IN THE MARKET. Let me give you an example:
consider 3 stocks: A, B, C and u want to go long on one.
now consider you buy A on day 1, and assume on day 2 price of A and B rise and C falls. would you switch to B?
You are given an hypothetical problem and asked if you want to stay with original your choice. Your answer of "I immediately said yes. anyone with my mindframe would also stick to their original choice" is incorrect and nonsensical.
There was nothing in the example about the markets, stocks or anything else. Answering the question incorrectly because you seem to think that you are actually answering a question to a different hypothetical situation (stocks) makes zero sense - apparently you think it makes you clever.
Next time I suggest that you just answer the question you are given, not the one that you believe is being asked.
And lastly, again, this problem has nothing to do with statistics (its probabilities) and your calculations above are incorrect. The original odds of making the right choice was 1/3. After one cup no containing the coin was removed, switching your choice improves your odds to 2/3. Now explain again where 0.16 comes from?Quote from Batman28:
the 'right' answer of course STATISTICALLY, as he stated, is you should swap and change your decision. i.e. if you stick with ur decision then 1/3 x 1/2 = 0.16.. but if you switch (implying from the start the coin was under one of the other cups) then 2/3 x 1/2 = 0.33.. i.e. higher probability.