Languages we use can help or hinder our thinking.

When we are working in different worlds, we need to simplify the words used without 1 million jargons. We simplily cannot work with 1 million jargons in banking,1 million jargons in derivatives, 1 million jargons in insurance,1 million jargons in computer algorithm, and another million of jargons from statistics and machine learning. Oh, what a mouthful!

Euler was able to make leaps and bounds in mathematics to a certain degree because of his use of symbols and simple notations.

Mathematics relies on simplifications.

Bets

Most financial products are bets: forwards, options, swaps, FX swaps,… etc.

Forward

Forward is agreeing to buy/sell something at sometime in the future at a price. It is a bet.

Buyer vs. seller Agreed price vs. market price at the time

Forwards are the riskiest financial contracts.

Risk (not a correct view, nonetheless…)

Where an organization makes the most money can be where the highest risks are.

Risk departement all day long seems to think their job is to follow policy.

Spent too much time and money on Risk & Controls, and nearly not as much on how to get the wholesale or trading business.

Volatility

Unfortunately everwhere standard deviation is used to represent volatility.

Rates

Rates are rental fees for rental of money.

SOFR

Overnight repo rate. The current “risk free” rate used in the U.S..