Reflection on Lio

Reflection Essay Week 3

Today we attacked several issues in decision-making. For the auction game in the class, as I have studied game theory in my undergraduate studies, it was rather easy for me to use mathematical tools to give favorable actions. But I do admit that we do easily behave according to our emotion stirred up by others’ behavior.

I happen to have watched the movie Rogue Trader, and in my opinion, besides what were identified as likely situation that propel to commit to a failing course of action (which were indeed great!), I think we should also emphasize on the fact that Nick had won back (actually more than) the money he first lost. This fact actually made Nick tend to believe that he had the ability to manipulate bank account and money, which, from the other perspective, stimulates his positive illusion! I guess that’s why Nick went so far.

As for cognitive bias, I am happy that I got most of answers correct in the survey. That’s because in a Fund Manager Summer Camp I participated, the professors actually taught a class Trading Strategy and Psychology to address the need to avoid undesirable trading actions due to psychological drawbacks like Anchoring. Like the class said, I do believe a trader with better psychological training could perform better than a trader only with sophisticated trading strategies.

In summary, I find today’s course extremely helpful as I am devoted to finance industry, where I could be easily exposed to lucrative profits and thus likely to conduct undesirable behavior. I am also happy to see that many of the governments and institutions nowadays become more aware of these problems and thus implement various policies such as Basel Accords to better regulate bank

in response to the

deficiencies in financial regulation revealed by the late-2000s financial crisis.