Since we only covered the first 12 slides in the lecture note from Thursday, I have split this document up into parts 1 and 2; the lecture notes are now entitled "Introduction to Binomial Trees (Part 1)" and "Introduction to Binomial Trees (Part 2)". We covered Part 1 on Thursday, and I plan to cover Part 2 this coming Tuesday (November 2 (election day)). Problem set 6 is now due on Thursday, November 4, and the assigned reading for that day will be chapter 11 of the textbook. I will post a lecture note for chapter 11 sometime prior to next Thursday.
If you are interested in listening to the MP3 file which I played in class today, go to http://129.62.162.212/fin4366/johnkerr.mp3.
Also, you'll want to be sure to view the Club for Growth's ad concerning the dangers of "changing one's mind" (Windows Media | Real Player | Quicktime).
The new lecture note (entitled "Introduction to Binomial Trees"; based upon chapter 10 of the textbook) is now available. Please download and print it out in preparation for tomorrow's lecture (also, be sure to read chapter 10 if you haven't already done this).
Also, Problem set 5 is due tomorrow, and a 6th problem set (based upon chapter 10) will be due next Tuesday (see the "Problem Sets" page for information on Problem set 6).
Earlier this month, I wrote about the impact of the tort system on flu vaccine availability in the United States. Interestingly, travel companies are now bundling flu vaccination with vacation opportunities in Canada. Fodor's has an interesting story about the "Flu-Shot Ferry", a round trip between Seattle and British Columbia selling for $105 with the flu shot included. The same story also links to an interesting Boston Globe article entitled "Business brisk as Americans stream to Canada for flu shots" which talks about the Flu-Shot Ferry as well as other flu vaccination/vacation opportunities available throughout Canada, such as a weekend plane trip from New York to Montreal.
Today's Wall Street Journal article entitled "For Math Whizzes, The Election Means A Quadrillion Options" provides an overview of the various quantitative techniques being employed by geeks all over the country who typically are tenured college professors who probably have too much time on their hands. Notwithstanding the barrage of criticism which has been leveled at the prediction markets (e.g., one commentator has described the Iowa Electronic Exchange Market as "college students playing with their lunch money", and others have offered even more unflattering comments which will not be repeated here), I remain a fan and am looking forward to how the realized election results line up with these markets' predictions.
Speaking of the prediction markets, the prices on the state-specific "Bush win" contracts offered on tradesports.com suggest that Bush currently (as of 10 a.m. on October 26) has a 19 electoral college vote advantage over Kerry; specifically, 253 to 234. The basis for this assessment involved allocating electoral college votes to Bush in states with "Bush win" contract prices exceeding $60, and to Kerry in states with "Bush win" contract prices less than $40. In my opinion, the states which are really in play are those with "Bush win" contract prices between $40 and $60. There are five states which fit this criterion: Wisconsin, Ohio, New Mexico, New Hampshire, and Minnesota. The following table lists the current prices for Bush contracts in these states, along with the number of electoral college votes which each state owns:
State | Electoral College Votes | 10/26/2004 "Bush win" Contract Price |
WISCONSIN | 11 | 59 |
OHIO | 21 | 55.5 |
NEW MEXICO | 5 | 50 |
NEW HAMPSHIRE | 4 | 44.5 |
MINNESOTA | 10 | 40.8 |
If Bush holds onto the states with contract prices exceeding $60, a win in Ohio would put him over the top. If Bush does not win Ohio, he can still be reelected by taking Wisconsin, New Mexico, and New Hampshire. Kerry on the other hand, will not likely win the election without taking Ohio. Of course, various other permutations are possible. The prediction markets data suggest the possibility of a 269-269 tie in the electoral college, which would happen if Kerry wins Ohio, New Hampshire and Minnesota, while losing Wisconsin and New Mexico to Bush.
Certainly the quantitative models are interesting, and as indicated by the Wall Street Journal article referenced above, suggest that the election may very well be somewhat of a toss-up. However, there is probably no predictive indicator which has been as consistently accurate as the Weekly Reader poll. Since 1956, Weekly Reader students in grades 1-12 have correctly picked the president. As noted on the Weekly Reader website, "President Bush was a strong winner in the student poll; the only state Senator Kerry won was Maryland. Senator Kerry was also in a statistical dead heat with President Bush in New York, Massachusetts, Washington, D.C. and Vermont. President Bush won most grades, although Senator Kerry did win among tenth-graders." Also, results by grade are shown on the Weekly Reader website, in case if you are interested.
The lecture notes for Tuesday, October 26 are now available! The lecture is based upon chapter 9 of the textbook, and the title is "Trading Strategies Involving Options".
This evening on KWBU, a one hour PBS program entitled "The Crash of 1929" will be airing, starting at 8 p.m. The PBS home page for this program is located at http://www.pbs.org/wgbh/amex/crash/gallery/index.html. There, you can obtain much more detailed information about this program, including information such as a Film Description, Program Transcript, suggestions concerning Further Reading, etc.