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Money Laundering and Quant Code

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Also the fiduciary rule, worries about worries, and the return of worries about covered interest parity.
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stefanetal
7 hours ago
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"On the one hand, you know, you had one job. If there's one person to hold responsible for not catching money laundering, it's the person whose job it was to catch money laundering. On the other hand, the incentives that creates are really bad! The stereotyped dynamic in any regulatorily sensitive business is:

Business unit employee: Let's do the thing.
Compliance officer: We're not supposed to do that thing.
BUE: What's the worst that could happen?
CO: You could go to jail.
BUE: Oh fine we won't do the thing.

What you don't want is this dynamic:

Business unit employee: Let's do the thing.
Compliance officer: We're not supposed to do that thing.
BUE: What's the worst that could happen?
CO: I could go to jail.
BUE: Hahaha that's what we hired you for buddy.

Compliance officers have authority at a company to the extent that people believe that their job is to keep everyone else out of jail. If it's to keep themselves out of jail, then they're just sacrificial lambs. "
Northern Virginia
stefanetal
7 hours ago
And yes, people are worried since we have a new Administration.
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Val D'Ultimo in South Tyrol, Italy More than 150 years ago this...

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Val D'Ultimo in South Tyrol, Italy

More than 150 years ago this house was built on ground-level. In 1882, a rogue flood caused by a near stream swept away the surroundings, but the cabin has withstood the flood. Surprisingly a giant rock appeared under the cabin, which saved the house and its residents from being swept away.

Submitted by Stefan Mahlknecht / @stefan_mahl

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stefanetal
23 hours ago
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Northern Virginia
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The fiscal future of the West, the culture that is inheritance

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Heaven forbid that people of means should pay for their own health care, what a sensible idea this was:

Last week, she [Theresa May] came up with a flawed but constructive answer to the crisis of funding in social care. The elderly would finance their care out of their own estate upon death. The upper limit on their contribution would go but they could keep £100,000 for their children. In the mixed metaphors that proliferate in politics, a floor would replace a cap.

The idea turned old age into a high-stakes game of chance — die suddenly and your estate would go untouched, contract dementia and it would shrivel over time — but it confronted voters with the principle that things must be paid for and challenged the Conservative cult of inheritance. Mrs May made it central to her election manifesto. Her self-image as a firm leader hinged on her fidelity to this brave, contentious idea.

A few days of popular disquiet and the cap is back.

That is from Janan Ganesh at the FT.  Solve for the fiscal equilibrium!

The post The fiscal future of the West, the culture that is inheritance appeared first on Marginal REVOLUTION.

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stefanetal
23 hours ago
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One of the key issues of our time. Not actually clear how to do this properly. I do recall reading about the effects of Medicare introduction in the 60s, and seeing it called 'estate insurance, not health insurance' (or something similar).
Northern Virginia
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How much difference does partisan gerrymandering make?

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Today in the Los Angeles Times, Brian Remlinger and I explain partisan gerrymandering, and how many seats it may be worth. Based on our analysis, more seats are affected by partisan gerrymandering now than at any point in the last five cycles of redistricting. In 2017, over 70 seats are made uncompetitive, favoring both parties. The net effect is a change in the margin of about 15 Congressional seats, in a direction favoring Republicans. Considering that the outcome of Affordable Care Act repeal yesterday in the House was decided by 4 votes, the advantage from gerrymandering is highly consequential.

We also review what the Supreme Court could do to limit partisan gerrymandering. Here at Princeton we are developing standards and a framework for the Court’s use. Read about in the Stanford Law Review and check out our website, gerrymander.princeton.edu. If you’re interested, perhaps join the effort!

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stefanetal
19 days ago
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Links appear broken...here: gerrymander.princeton.edu
Northern Virginia
acdha
18 days ago
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Washington, DC
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Investing Stores and Libyan Bribes

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Also non-GAAP accounting, ultra-long bonds, worrying about worrying, bank breakups and a Sixth Law of Insider Trading.
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stefanetal
20 days ago
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"'Remarkably, average single stock realized vol has now fallen to the lowest level on record (data since 1990). Realized stock correlation is also at lows rarely seen over the past 15yrs and is in the 25th %-ile since 1990. Hence, more than simply option selling programs depressing index volatility, there is unprecedented little movement at the single stock level, and correlation between stocks has been crushed as Trump policy creates a constant rotation between winners and losers.'

Index volatility is very low, single-stock volatility is very low, and stock correlation is also very low. Individual stocks don't move very much, and the aggregate of stocks doesn't move very much, but the individual stocks and the aggregate don't move together. Everything is bouncing around randomly with no connection to anything else -- they're just not bouncing around very much. There's an intuitive story connecting the decline of volatility to the rise of indexing: Investors can diversify more efficiently, so there's less need to trade constantly and so less need for stocks to bounce around. But that doesn't fit the facts: The index is quiet, and the individual stocks are quiet, but they're quiet in different."

This may just be real world implementation catching up with theoretical rational expectations equilibrium. We had the equity premium puzzle and that went away. We had simple trading strategies based on previously hard to collect or process data (return momentum!) go away. We have the 'excess vol' puzzle...so maybe that's gone too now, as more rational data based vol trading (and news trading) is implemented.

Obviously, sometimes there are transition issues as some trades get too crowed and returns are based on misjudgments about that...but the above can still be true even in that case.

Northern Virginia
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Princeton’s Ad-Blocker May Put an End to the Ad-Blocking Arms Race

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A team of Princeton and Stanford University researchers has fundamentally reinvented how ad-blocking works, in an attempt to put an end to the advertising versus ad-blocking arms race. The ad blocker they've created is lightweight, evaded anti ad-blocking scripts on 50 out of the 50 websites it was tested on, and can block Facebook ads that were previously unblockable.

The software, devised by Arvind Narayanan, Dillon Reitman, Jonathan Mayer, and Grant Storey, is novel in two major ways: First, it looks at the struggle between advertising and ad blockers as fundamentally a security problem that can be fought in much the same way antivirus programs attempt to block malware, using techniques borrowed from rootkits and built-in web browser customizability to stealthily block ads without being detected. Second, the team notes that there are regulations and laws on the books that give a fundamental advantage to consumers that cannot be easily changed, opening the door to a long-term ad-blocking solution.

The Federal Trade Commission regulations require advertisements to be clearly labeled so that a human can recognize them, which has created a built-in advantage for consumers and, now, ad blockers. The team used several computer vision techniques to detect ads the same way that a human would, which they call "perceptual ad blocking." Because advertisers must comply with these regulations, the authors imagine an "end game" in which consumers—and ad blockers—ultimately win.

"Unlike the behavior of malware, the behavior of both publishers/advertisers and ad-blocking tools already is, and will continue to be, shaped by regulations," they write in a paper explaining the ad blocker. "A favorable legal climate and the existence of browsers friendly toward ad-blocking extensions are two key factors that may tip the scales toward users."

Ad-blocking is obviously a fraught ethical topic—especially for a journalist whose salary is paid for in large part by advertising. The rise of malvertising, invasive tracking and surveillance, and heavyweight scripts that can bog down browser performance mean that there is a strong case to be made for blocking ads (a recent study found that advertising and scripts slow down web pages by an average of 44 percent). On the other hand, ads allow companies like VICE to keep the lights on, and widespread ad-blocking has already made significant dents in the revenue streams of online publishers.

While the researchers don't take an ethical stance about whether you should use an ad blocker or not, they do believe that the advertiser/publisher/reader relationships must fundamentally change.

"The fundamental problem with online ads today is a misalignment of incentives—not just between users and advertisers, but between publishers and advertisers," Narayanan told me in an email. "We've consistently found that publishers are upset about rampant online tracking and the security problems with ads, but they don't have much control over ad tech. Changing this power imbalance is important if we want a long-term solution."

A proof of concept is now available for Chrome, but is not fully functional (as in, it only detects ads, it doesn't block them): "To avoid taking sides on the ethics of ad-blocking, we have deliberately stopped short of making our proof-of-concept tool fully functional—it is configured to detect ads but not actually block them," Narayanan said.

With two highly motivated parties involved—a largely open source ad-blocking developer community and publishers who have their bottom lines at stake—the ad-blocking arms race has gotten significantly more complex over the past several years. Popular ad blockers like Adblock Plus and uBlock Origin work by detecting code that is used by standard ads; urls and markup code popularly used in ads are shared on huge open source lists that are often maintained by humans.

This means advertisers and publishers can simply change the code they use to deliver their ads to defeat them. This type of ad-blocking is often easily detected by anti ad blockers, which are deployed on the sites of more than 50 popular publishers. Finally, traditional ad blockers fail to block native ads that look like normal content, which is why your ad blockers won't detect and block sponsored posts on Facebook.

Perceptual ad-blocking, on the other hand, ignores those codes and those lists. Instead, it uses optical character recognition, design techniques, and container searches (the boxes that ads are commonly put in on a page) to detect words like "sponsored" or "close ad" that are required to appear on every ad, which is what allows it to detect and block Facebook ads.

"As long as the disclosure standards are unambiguous and adhered to, a perceptual ad blocker will have a 100 percent recall at identifying ads governed by that standard," the researchers wrote. Because new disclosure standards generally have to go through legal vetting and are required, they are less likely to change than the code used to deliver the ads.

To defeat anti ad blockers, the researchers say they've borrowed techniques from rootkits, which are often used for malware but can be adapted to "hide their existence and activities" from ad-blocking detectors. This is done because browser extensions are given a higher "privilege" than advertisements and ad blocker detectors. Another technique that was not used but was proposed to hide the ad blockers' activities is even more impressive. They are able to "create two copies of the page, one which the user sees (and to which ad-blocking will be applied) and one which the publisher code interacts with, and to ensure that information propagates between these copies in one direction but not the other."

What we have, then, is research that points toward a potential end of the ad-blocking arms race. Your move, publishers.

Update: This article has been updated to clarify that a technique that would create two copies of a webpage was only proposed, not tested. 


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duerig
39 days ago
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Hmm. I tried the extension and it seemed fairly ineffective. Perhaps this is just a proof of concept and others will run with the idea and make it solid.

I'm not in the least concerned with whether adblocking is 'ethical' in regards to reading online content. But I am worried that there is increasingly a divide between the rich and/or tech-saavy who have figured out how to avoid the assault of advertising and the poor/vulnerable who are preyed on by advertisers. In other words, I think people should have no qualms about avoiding advertising as much as possible. But I do want the ability to avoid advertising to be distributed to everyone and not just the lucky few.
stefanetal
20 days ago
I'm more interested in adblockers that are not detectable to websites. It's unclear to me why they don't exist, it shouldn't it be easy to implement (just pull the ad content but don't display it?). More sites now lock out browsers using adblockers...
duerig
20 days ago
I think sneaky ad-blockers would definitely be possible. Especially at the browser level, there would be nothing preventing a browser from doing everything but actually displaying/playing ad content for the user. I come at this a bit differently, though. I would love it if there were a way for me to tag every HTTP request I make with a header that indicates that I am blocking ads. If a site doesn't want to show their content to those who block ads, I want to give them the opportunity to avoid showing the content. That creates a certain symmetry. I have the option of declining to view their ads and they have the option of declining to show me their article. This would definitively put to rest the canard that ad-blocking is somehow 'stealing'. When I come across an ad-blocker-blocker message, I just close the tab and look elsewhere. There is a super-abundance of digital goods, which is both amazing (for readers) and worrying (for publishers). But it means that as a consumer, I can go elsewhere if any particular destination makes onerous demands about ads.
stefanetal
20 days ago
Yes, I was wondering if the lack of stealth adblockers was due to ethical concerns (weird, I know, but this does seem to matter sometimes). It is true that I can now argue that sites at least know, or can know, that I adblock them, so that we can tit-for-tat on this exchange. Not that I went in thinking like this when I was an early adopter, for me the 'defect' move was the obviously only stable equilibrium, so why worry about sustaining the unsustainable. I was stunned adblockers didn't get past 50% market share in 2 years. On the other hand, fake ad serving stats seems to be still a bigger problem (i.e. sites that sell fake ad clicks).
duerig
20 days ago
It is so odd to me that people even try to start conversations about the 'ethics' of ad-blocking. Nobody has a right to my eyeballs, time, or attention. To the extent that there are economic arrangements built upon this 'right', I don't feel obligated to support those arrangements. If the edifice of ad-supported content crumbles because of people like me, then I am fine with that. I'm willing to pay for ideas and digital goods that are really important to me. I'm willing to go without those that aren't. And while I am occasionally willing to tolerate ads if they can't be avoided, I will never feel obligated to pay attention to them or view them.
stefanetal
20 days ago
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Northern Virginia
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