Black Swan or Black Scholes

The last economic event was coined a “black swan.”  The phrase was popularized by Nassim Taleb, who penned a book by the name.

Generalizing richly, the black swan event is an unpredictable event. In the case of the mortgage meltdown, the theory is that we could never have seen home values–something that are deeply embedded in the American psyche–fall to such levels.

The theoretical leap of the Black Swan event is that we’re powerless to predict the economic future given our current tools.

It’s now cool and convenient to scoff at Black Scholes and other financial management formulas. They failed.Or did they?

In fact, on further review, how unpredictable was this? Is this really a black swan?

I knew an associate who bought a house (at too high of a price, in my opinion) and tried to sell it the next year or so at a 150 percent its original cost. 150 percent! Wow, that’s some investment. He lost his shirt.

I believe that the mortgage meltdown and the subsequent deep recession had nothing to do with the technological tools of quants and other investors; it had everything to do with our failure to use the right data and even more importantly, the failure to interpret the data correctly.

It’s still ultimately human error that generated the economic collapse, though technology is a convenient scapegoat. Human psychology wants to believe in continuity and dependability. If the market always has gone up, it always will go up. If homes have always been good investments, they’ll always be good investments.

The data — anecdotal and statistical — was there to prove this wasn’t the case.

But, technology without accurate observations and interpretations  is ultimately useless.

Garbage in, garbage out.


Taming Multiple Particle Entanglement

Reigning in particles is the key to quantum computation.

So, it’s no surprise that most of the research being conducted is centered on entanglement. Here’s another interesting stab at solving the entanglement problem found on

The researchers write that this is:

:an approach to characterize genuine multiparticle entanglement using appropriate approximations in the space of quantum states. This leads to a criterion for entanglement which can easily be calculated using semidefinite programming and improves all existing approaches significantly. Experimentally, it can also be evaluated when only some observables are measured. Furthermore, it results in a computable entanglement monotone for genuine multiparticle entanglement.

The researchers suggest that this approach will lead to an “exponentially improved noise robustness” compared to current methods.

Here’s the pdf for the research paper.

One Small Step… New Quantum Software Available

Bob Tucci, who blogs at Quantum Bayesian Networks, announced another quantum software breakthrough.

He’s just released a paper on detailing a software that generates quantum circuits. The software is called QOperAv. (Think: Copper Ave.)

The resulting circuit, then, can be used to:

evaluate with polynomial efficiency the average of $f(A)$ for some simple (that is, computable with polynomial efficiency) function $f$ and a Hermitian operator $A$, provided that we know how to compile $\exp(iA)$ with polynomial efficiency.

This is actually the last in a series of papers that Bob has released this fall and are all steps toward creating the quantum computing software necessary to match the recent innovations of quantum computing hardware researchers, for instance: here and here.

From the outside, quantum computing may still seem faraway, but innovations like this are proving that the pieces are slowly rapidly falling into place.

Experiment Seeks Warm Entanglement

Entanglement–when the measurement of one particle immediately appears to have an effect on another particle–is one of the weird properties of quantum mechanics. It leads to all sorts of heresies, like superluminal information transfer, spooky action at a distance, and other oddities.

Fortunately, for the sake of deeply deterministic physicists, there’s a little thing called decoherence. Simply stated, it means that if things are warm and big, it’s hard to get particles to entangle or enter into superposition.

Somewhere, because of warmth, our two worlds–weird, little alive-dead cat quantum world and giant Newtonian billiard ball world–split.

At least, this split  allows us go about our day, not thinking about creepy little events, like two particles being in synch, even though they might be across the universe from each other. But, it also makes things like quantum computing a little tricker.

A new experiment, however, is testing the limits of warm entanglement. Fernando Galve, from the University of the Balearic Islands in Spain, and his team are creating a nano-diving board to create an experiment to achieve high temperature, macro-scale entanglement.

Their theory is this:

By coupling the two oscillators together with the analog of a spring and then causing the strength of the spring to oscillate in time, the entanglement can be made to survive, despite interactions with a high-temperature environment.

The nano-device will be used to achieve a “squeeze” state.

The key is that the oscillators would be driven into a so-called squeezed state. Heisenberg’s uncertainty principle says that the product of the uncertainties in two complementary quantities (like position and momentum) must exceed a certain amount. In a squeezed state, the uncertainty in one of the quantities is squeezed down to a very small value, leaving all the uncertainty in the other quantity. For the coupled oscillators, the two quantities are the sum of and the difference between the two block positions. The squeezed state has most of the uncertainty in the sum, so the difference is known very precisely. If the position of one block is measured, the position of the other is instantly known to high precision–the signature of entanglement. The driving spring would keep pushing the oscillators into this entangled, squeezed state and counter the tendency for thermal energy to destroy it.

My opinion here: it’s a helluva theory.

You can read the complete report here and tell me what you think.

I’ll keep an eye out for results.


Think Big: Anton Zeilinger’s Advice to Quantum Researchers

Picture by Jacqueline Godany

I don’t know if it’s just me, but it seems that a lot of researchers in future technologies, especially quantum computing, always feel like they are apologizing for the potential of their tech.

It might be based on AI winter when the seemingly limitless powers of artificial intelligence was just around the corner.

Then it was around the other corner.

Then around the next corner.

And so on.

I hear similar attempts to temper the enthusiasm of quantum computing research.

But, it might be time to stop making excuses.  In this interview quantum pioneer Anton Zeilinger advises researchers to start thinking big.

As he puts it:

“Even in the most basic sciences you cannot work without bold attempts taking risks. You have to be open, you have to be challenging – this is the interesting stuff. I wouldn’t like to look at science as just one more step here or one more step there.”

Dr. Zeilinger should know something about thinking big — he’s been behind some of the most mind-boggling quantum teleportation experiments. Currently, he’s working on optical quantum computing using photons only.

He expects serious quantum computing to take hold in about 15 to 20 years.

What’s Dr. Z’s big idea?

How about a quantum computer in your mobile phone.

I said this partly tongue-in-cheek in the hope to encourage young people to have courageous minds. You have to set goals that are wildly ambitious. The point is that completely new technologies will emerge that we never predicted. Look at the laser. When it was invented [50 years ago] nobody predicted the two most common applications we see today – the CD player and the supermarket scanner. Nobody predicted this – that’s the way it always works.

Read more about Dr. Zeilinger here.

The Mindful Trader. Becoming One with Alpha

Trading is a mysterious process.

There’s no end to it. There’s no certainty. Good trades can go bad. And bad trades can go good.

While most people would say that spirituality is the exact opposite of trading, there’s a zen to trading, just like there are spiritual paths to every endeavor.

Mindfulness training can be helpful to a trader for a few reasons.

First, mindfulness lowers stress. Stress for a trader is practically a given because of the shifts in fortune and uncertainty. By becoming aware of one’s thoughts, you recognize the repetitive, stressful thoughts and minimize the stress it causes you.

Another reason that mindfulness suits trading psychology is that you distance yourself from the emotions that cloud your decisions. Emotions, which can form negative trading patterns, are probably the worse enemies a trader has. There are two biggies: greed and fear. But other emotions can interfere with your intuition, or, if you will, your instincts. Insecurity, anger, envy, and dozens of other emotions bubble up in any given trade. By becoming aware of these emotional clouds, you’ve taken one step closer to mastering them, or, at least minimizing their effect on your trades.

There are those who suggest that you can retain more cognitive powers by eliminating the “junk” thoughts that bubble up in your head. Still others suggest more esoteric powers arise from mindfulness.

So, what is mindfulness?

Read more of this post

Quantum State Detection, Yet Another Quantum Leap

It’s almost becoming a cliche: quantum computing breakthrough.

But there’s been another one. This time, it’s from UC Santa Barbara.

Researchers there have combined laser light with trapped electrons to not only detect an electrons quantum state, but control it. Even more importantly, the technique does not erase the fragile quantum state of the electron.

This can pave the way for improved quantum computing and quantum teleportation over long distances.

Physicists use a thin diamond crystal and a laser light to trap and manipulate the quantum state.

The research was led by David Awschalom, professor of physics, electrical and computer engineering, and director of UCSB’s Center for Spintronics and Quantum Computation, andg Bob Buckley, a grad student.

Buckley is optimistic that the technique will one day be exploited for exploiting the power of quantum computing.

“Diamond may someday become for a quantum computer what silicon is for digital computers today –– the building blocks of logic, memory, and communication. Our experiment provides a new tool to make that happen. “

Read more here: