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# Financial Modeling

• Stock Market Investing - Predicting the stock market is without question the most financially rewarding mathematical modeling opportunity available. There is no shortage of people who have studied the question, and plenty of people who believe that stock prices are a random walk and inherently unpredictable. But that shouldn't stop you with hunting for inefficiencies of your evaluating well-known approaches.

Although there is a plethora of sites which will tell you today's closing prices, it is surprisingly difficult to find good historical stock data on the WWW in a suitable format to download. Long term daily price data on selected stocks is available from the Chadwick Investment Group at http://www.chdwk.com/stock.html. One year's worth of historical stock market data is available from http://biz.swcp.com/stocks/.

• Economic Forecasting - There is much more to modeling the economy than just stock prices. How are interest rates tied to the dollar against foreign currencies? The U.S. Federal Reserve (http://www.federalreserve.gov/releases/) provides extensive historical economic data, including well over ten years of international exchange rates and interest rates.

 I hope you have enjoyed this excerpt from Calculated Bets: Computers, Gambling, and Mathematical Modeling to Win!, by Steven Skiena, copublished by Cambridge University Press and the Mathematical Association of America. This is a book about a gambling system that works. It tells the story of how the author used computer simulation and mathematical modeling techniques to predict the outcome of jai-alai matches and bet on them successfully -- increasing his initial stake by over 500% in one year! His method can work for anyone: at the end of the book he tells the best way to watch jai-alai, and how to bet on it. With humor and enthusiasm, Skiena details a life-long fascination with the computer prediction of sporting events. Along the way, he discusses other gambling systems, both successful and unsuccessful, for such games as lotto, roulette, blackjack, and the stock market. Indeed, he shows how his jai-alai system functions just like a miniature stock trading system. Do you want to learn about program trading systems, the future of Internet gambling, and the real reason brokerage houses don't offer mutual funds that invest at racetracks and frontons? How mathematical models are used in political polling? The difference between correlation and causation? If you are curious about gambling and mathematics, odds are this is the book for you! This book is available in both hardcover and paperback.

Steve Skiena
2001-06-04