The Cuban Restaurant was across the street from the 103rd Precinct. It was a small place, with a faded green awning and a few menus posted in the windows, one in Spanish and one in English.
The two of them walked inside. The air was filled with the aroma of garlic, lemon juice, and char-grilled meat.
A television on the wall was playing a baseball game at low volume. Several uniformed and plainclothes officers were sitting toward the back. When they saw Morales come in, one of them raised a hand in greeting.
Morales chose a seat by the window, where he could see the precinct entrance.
He sat down, put his police hat on the chair beside him, and picked up the menu on the table, handing it to Lin An.
"Order whatever you like. Lunch is on me."
"Thank you."
Lin An took the menu and glanced at it.
Half the dishes on the menu were in Spanish and half in English. He couldn't make much sense of it, but the Bullet Screen could, so he turned straight to the "Platos Principales" page and pointed to the sixth item.
"I'll have the roast pork with black beans and rice."
"Good choice."
Morales handed the menu to the waitress who had come over, a Cuban woman in her fifties with graying hair and grease stains on her apron.
"Two roast pork plates with black beans and rice, and two mango juices."
The waitress took down the order and walked away.
Morales leaned back in his chair, folded his hands over his stomach, and looked at Lin An.
"Dr. Lin An, where are you from?"
"China."
"I know China. Where in China?"
"A small third- or fourth-tier city in the south. You probably haven't heard of it."
Lin An smiled.
"Just as I've never heard of the place you were born."
Morales froze for a moment, then laughed.
"I was born in Brooklyn. Bushwick. You've definitely never heard of it."
"I've heard of it," Lin An said.
"Bushwick used to be an industrial district. A lot of artists have moved there in recent years because the rent is cheap."
Morales raised an eyebrow.
"You just got to New York, and you already know about Bushwick?"
"I spent several days biking around New York," Lin An said.
"Jamaica, Bushwick, Williamsburg, Greenpoint, Long Island City. I went to all of them."
"On a bicycle?"
"My friend rode. I sat on the back."
Morales stared at him for two seconds, then burst out laughing.
"You sat on the back?"
"Yeah."
"A Columbia doctoral student, riding around New York on the back of a bicycle?"
"What's wrong with that?" Lin An asked, his expression perfectly serious.
Morales opened his mouth, then closed it again.
He wanted to say, "A lot is wrong with that," but then he remembered what his daughter, Caitlyn, had told him...Chinese people would ride the ferry back and forth four times just to see the Statue of Liberty, or make a special trip to the Bronx to photograph graffiti walls.
Riding around New York on the back of a bicycle didn't seem that strange, after all.
"Nothing's wrong with it," Morales said.
"I just didn't expect it."
The mango juice arrived. Morales picked up his glass, took a sip, and set it down.
He was about to continue when the bell above the restaurant door rang.
A woman in her late twenties walked in. Her dark brown hair was tied in a low ponytail, and she wore a dark gray blazer and black flats. She carried a tote bag and had the look of someone who had "finally made it."
She glanced around the restaurant, spotted Morales, and hurried over.
"Dad."
She set down her bag, pulled out a chair, and sat, catching her breath.
"When you called, I was delivering some documents over by the courthouse. I was just around the corner."
Morales glanced at her, then at Lin An, the corners of his mouth lifting slightly.
"Caitlyn, this is Dr. Lin An. I told you about him—the Columbia doctoral student in the Department of Mathematical Finance who's working with Professor Jero."
Then he turned to Lin An.
"Dr. Lin An, this is my daughter, Caitlyn Morales. She's getting her master's in public policy at the City University of New York and will graduate this year."
Caitlyn held out her hand, and Lin An shook it.
"Caitlyn, Dr. Lin An helped one of my officers sort out a tax issue. He came to the precinct today to report his passport lost."
Caitlyn studied Lin An with barely concealed curiosity.
"You studied under Professor Jero. Did you transfer with him from MIT?"
Transferred with him from MIT?
[233]
[Streamer, remember this bit of information. She's helping you flesh out your backstory.]
Lin An nodded.
"More or less."
"More or less?"
"The paperwork's still going through. I got here first."
Caitlyn picked up the glass of mango juice on the table—the one Morales had been drinking from—took a sip, and set it down.
"What were you researching with Professor Jero at MIT?"
"Structural models for pricing credit derivatives," Lin An said, calm and confident. Following the Bullet Screen's prompt, he continued, "Professor Jero's structural credit model treats a company's default intensity as a function of state variables, fitting credit spreads with an affine jump-diffusion process in a continuous-time framework."
Caitlyn's eyebrows rose. She swallowed, suddenly realizing that this one sentence was like a compressed file. If unpacked, it could contain at least five thousand words of information.
"How long were you at MIT?"
"Not long," Lin An said.
"But long enough to learn a few things."
Morales sat beside them, listening. His expression shifted from relaxed to faintly bewildered...He knew how every word sounded, but he couldn't understand what they meant when strung together.
He picked up his mango juice and took another sip, deciding not to interrupt.
The waitress brought over two plates of roast pork with black beans and rice. The meat had golden-brown skin, and when cut open, it revealed tender white flesh. It came with black beans and rice, fried plantains, and a small dish of garlic-lemon sauce.
Morales picked up his fork and glanced at Caitlyn.
"Have you eaten?"
"I have. I got a hot dog from a food truck by the courthouse," Caitlyn said, her gaze still on Lin An.
"Dr. Lin An, where did you do your undergraduate studies?"
"In China," Lin An said.
"At a school you haven't heard of."
Caitlyn smiled.
"When you applied to MIT, what did you get on the GRE?"
"Perfect score in math, six hundred on verbal," Lin An said, spearing a piece of pork and dipping it in the lemon sauce.
Caitlyn's eyebrows rose again, and a flicker of surprise crossed her eyes.
"Six hundred on verbal? Not bad. That's a very high score for an international student. Your English reasoning and vocabulary must be excellent."
"Good enough," Lin An said, putting the pork in his mouth.
Caitlyn leaned back in her chair, folded her arms across her chest, and watched Lin An eat for a while.
"There's something I've been wanting to ask someone."
"Go ahead."
"I read an article about subprime mortgage securitization for my Public Policy Course. It mentioned a concept called the Gaussian Copula and said it was one of the causes of the 2008 financial crisis.
"I've looked through a lot of sources, but I still don't understand what it is."
She paused.
"Could you explain it to me?"
Morales speared a piece of pork and chewed more slowly...This was even harder for him to follow, but he wanted to try to remember what Dr. Lin An said. It might come in handy someday.
Lin An put down his fork, picked up a napkin, and wiped the corner of his mouth. He lifted his gaze toward the top of Caitlyn's head, where a long line of Bullet Screen text was scrolling.
"The Gaussian Copula," he said.
"Simply put, it's a mathematical tool for measuring the default correlation between different assets."
He looked at Caitlyn.
"Suppose you have two loans, one in Florida and one in California. If the Florida loan defaults, what's the probability that the California loan will default?
"These events aren't independent, because both are affected by the same macroeconomic factors...such as housing prices, unemployment, and interest rates."
The Gaussian Copula maps each loan's default time onto a standard normal distribution, then connects them with a correlation matrix.
It's computationally efficient, but it has one fatal flaw...It underestimates correlation in extreme situations.
In normal markets, it seems fine. But when the market crashes, all correlations move toward one at the same time, and the model fails completely.
Caitlyn listened intently.
"Then why does everyone still use it?"
"Because it's convenient," Lin An said.
"And the people who use it get bonuses, while the people who don't lose their jobs. Before the financial crisis, no one was going to get fired for using the industry-standard model."
Caitlyn nodded, thoughtful.
"What if you used another model? Is there a better one?"
"Yes," Lin An said.
"For example, the t-Copula. It describes tail dependence more accurately, but it's computationally expensive, its parameters are unstable to estimate, and you can't just press a few buttons in Excel and get the answer."
He paused.
"Wall Street doesn't like anything too complicated."
Caitlyn laughed.
"You're very direct."
"Math is direct," Lin An said.
"It won't change the answer just because you want to make money."
Caitlyn looked at him, something new in her eyes.
"Then I have another question," she said.
"How does the Volatility Smile arise in the Black-Scholes model?"
At the question, Morales stopped with his fork in midair and looked from Caitlyn to Lin An.
He couldn't understand what they were talking about, but his daughter's tone sounded a little like she was asking for advice.
Lin An answered without hesitation.
"The Black-Scholes model assumes volatility is constant, but the implied volatility in market data forms a smile...the implied volatility of Out-of-the-money Options and In-the-money Options is higher than that of At-the-money Options.
"That means the market believes the probability of extreme events is higher than what the Lognormal Distribution predicts."
He paused, then speared a piece of fried plantain. It gave him a moment to rest and let the Bullet Screen refresh.
"Essentially, the Volatility Smile is the market correcting for the model's errors. Black-Scholes assumes asset prices change continuously, volatility stays constant, and returns follow a normal distribution...none of those assumptions hold in the real world.
"Market participants know this, so they use implied volatility to 'calibrate' the model, reflecting its errors in a single parameter."
Caitlyn's lips moved as if she wanted to say something, but no words came out.
Lin An continued.
"After the 1987 stock market crash, the smile turned into a 'skew,' because the market started distinguishing between rises and falls. Implied volatility is higher for declines than for gains, which shows that the market fears a crash more than a boom."
He glanced at Caitlyn.
"Your professor must have taught you this."
Caitlyn nodded, her expression growing serious.
"Taught it, but not as clearly as you did."
She thought for a moment.
"Then do you think this skew changed after the 2008 financial crisis?"
"It did."
Lin An said.
"The skew became steeper. The market priced in more tail risk than before. You can see it in the implied volatility curve for S&P 500 index options... The slope on the left tail is much steeper than on the right."
He paused.
"That means the market thinks another event like 2008 is many times more likely than a rise of the same magnitude."
Caitlyn fell silent.
She looked at Lin An as though reassessing the man sitting across from her.
Then she gave him a smile that said, "I give up."
"Okay."
She said.
"If I keep asking questions, my degree is going to be exposed."
Lin An looked at her.
"Then let me ask you something."
Caitlyn blinked.
"You're asking me?"
"Yes."
Lin An said, setting down his fork and folding his hands on the table.
"You asked me two questions, and I answered both. Now it's my turn to ask you."
Caitlyn's smile froze for a moment, then she nodded.
"Go ahead."
"In the field of public policy, the Federal Reserve introduced a 'macroprudential regulatory' framework after the 2008 financial crisis.
"My question is... what are the core metrics behind this framework, such as the additional capital requirements for a Systemically Important Financial Institution? What are they based on?
"In other words, how do you decide that a bank is 'too big to fail'? What mathematical standard do you use?"
Caitlyn opened her mouth.
Her fingers tapped lightly on the table twice, then stopped.
"I..."
She thought for a moment.
"I know some qualitative criteria, like asset size, interconnectedness, and complexity... But the specific mathematical standards..."
She trailed off. Fine beads of sweat began to form on her forehead.
Lin An watched her quietly. He neither rushed her nor mocked her.
Caitlyn took a deep breath.
"I'd need to look it up."
She said, her voice two notches quieter than before.
"I remember some of the metrics, like CoVaR and SRISK... but I can't tell you exactly how they're calculated."
She picked up her mango juice and took a large sip. The cold liquid slid down her throat, but the heat in her face didn't fade.
Morales watched the whole exchange and gave a slight shake of his head. He knew his competitive daughter had lost.
Sitting across from a Chinese boy several years younger than her, she'd been stumped by a single question and was sweating profusely. There was no doubt about it: she'd lost, completely and utterly.
Morales set down his fork and took a sip of mango juice, hiding the curve of his lips.
"It's all right."
Lin An said, his voice as gentle as if he were comforting a student who'd done poorly on an exam.
"CoVaR and SRISK were both proposed after 2008. Your textbook may not have been updated yet. Calculating these metrics involves quantile regression and modeling tail dependence, which aren't a focus of a public policy course."
He paused.
"I just wanted to know how much you knew."
Caitlyn looked at him, her expression complicated.
"How much do you know?"
"All of it."
Lin An said. His eyes flicked slightly upward toward the Bullet Screen, and he smiled.
"But this is my field, not yours. You don't need to feel bad about not knowing these things."
Caitlyn set down her mango juice, leaned back in her chair, took a deep breath, then slowly let it out.
"Okay."
She said.
"You stumped me. I give up."
After they finished eating, Morales paid the bill, and the three of them walked back to the Precinct.
Caitlyn followed behind them, her tote bag slung over her shoulder. Her pace was a little slower than before, as if she were still thinking about that question.
As they reached the entrance, Morales paused.
"Dr. Lin An, you said in the conference room that you could take a look at my tax return?"
"Sure."
Lin An said.
"Did you bring the documents?"
"They're in my office. Come with me."
Morales's office was on the first floor, at the end of the hallway. A nameplate on the door read... "Lieutenant Morales."
He pushed open the door and let Lin An in.
Caitlyn followed them inside, sat in a visitor's chair, and placed her tote bag by her feet.
The office was small: a desk, a chair, two visitor's chairs, a filing cabinet, and a pot of pothos on the windowsill that was close to dying. The edges of its leaves had turned yellow and curled, like forgotten evidence.
Morales took a folder out of the filing cabinet and set it on the desk.
"My wife filed my 2008 taxes. She said everything was fine, but I've never felt quite right about it."
Lin An opened the folder, took out the documents, and spread them across the desk.
There were W-2 forms, 1099 Forms, Form 1040, along with some bank statements and receipts for charitable donations.
Caitlyn leaned over for a look, but quickly turned her gaze away... She was more interested in Lin An than in the tax forms, and she couldn't make sense of them anyway.
The Chinese often said that changing fields was like crossing mountains. In the United States, it really was like crossing a mountain, and the technical English vocabulary was one mountain after another.
Lin An spread the documents across the desk. On the surface, he pretended to study them, but in reality he was letting the other viewers take a look. Three minutes later, he looked up.
"Lieutenant Morales, there's nothing seriously wrong with your tax return, but there are a few ways to optimize it."
"What do you mean?"
"First, you have a Schedule K-1 from a limited liability company, showing a loss of $1,200. That loss could offset your other income, but your wife didn't use it when she filed your taxes."
Morales frowned.
"K-1? What K-1?"
"You don't know about this company?"
"I... Wait a second."
Morales took the K-1 from Lin An and looked it over. His expression changed.
"My brother and I invested in a small company together. It owns several rental properties in Jamaica. After the 2008 financial crisis, we couldn't collect the rent, and we lost money.
"My wife didn't know about it, and I forgot to tell her."
"That explains it."
Lin An said.
"This loss could save you about three hundred dollars in taxes."
"Three hundred?"
"Yes."
Lin An said.
"And your charitable donations, totaling $1,200, are fine. But your wife may not have noticed when filling out the forms that charitable deductions have a limit. Still, given your income, you should be able to deduct the full $1,200."
He paused.
"Overall, your wife didn't make any mistakes on the return. She just left out this loss.
"If you file Schedule E with the Internal Revenue Service and add the $1,200 loss, the IRS will refund you about three hundred dollars."
Morales leaned back in his chair, folded his hands behind his head, and gazed at the ceiling as he thought for a moment.
"Three hundred dollars."
He said.
"That's enough for my wife to buy a month's worth of groceries at BJ's Wholesale Club."
He lowered his hands and looked at Lin An.
"So what do I need to do?"
"You need to file an amended Form 1040X and attach a Schedule E to include the K-1 loss."
"Can you help me fill it out?"
"Sure."
Lin An said.
"But you'll need to confirm the information on the K-1 and make sure that loss really is your share."
Morales nodded.
"I'll check with my brother and get back to you tomorrow."
He took a sticky note from his desk drawer, wrote down a number, and handed it to Lin An.
"This is my cell number. Save it. What's your number?"
Lin An took it, glanced at it, and slipped it into his pocket.
"Okay, my number is..."
"One more thing."
Morales said.
"You live at Apartment 2B, 90-41 108th Street. That's not far from the Precinct. I'll tell the officers to keep an eye out when they're patrolling."
[That's a nice way of returning the favor.]
[The lieutenant means he'll have the officers pay more attention to 108th Street and keep Lin An safe.]
[In the United States, police attention is the best insurance.]
[And when the lieutenant said that, he was telling Lin An, "You helped us, and we'll help you too."]
[That's how human relationships work.]
Lin An stood up and held out his hand.
"Thank you, Lieutenant Morales."
Morales stood and shook his hand.
"Call me Morales."
He said.
"Just call me Morales."
Lin An left the office and walked down the hallway. As he passed the conference room, he saw the door was open. Patrick and O'Brien were still inside.
Patrick stood in front of the whiteboard, wiping away the few lines he'd written earlier. O'Brien sat in a chair with his arms folded, as if deep in thought.
Patrick saw Lin An and set down the eraser.
"Dr. Lin An, what did the lieutenant want?"
"He asked me to look over his tax return."
"He's got tax problems too?"
"Just a small one. He'd left out a loss and can get three hundred dollars back."
Patrick and O'Brien exchanged a glance.
"By the way."
Lin An stood in the doorway.
"Does anyone else at the Precinct have tax questions? I'm free for the next couple of days. I can take a look for everyone."
Patrick opened his mouth, but before he could speak, O'Brien had already stood up and walked to the doorway. He leaned out to look down the hallway, then turned back and lowered his voice.
"A lot of people do."
He said.
"But not everyone brought their documents."
"That's fine."
Lin An said.
"I'll be back tomorrow afternoon. I live at Apartment 2B, 90-41 108th Street. You can tell everyone to bring their documents over, and I'll go through them all at once."
Patrick nodded, then glanced at his watch.
"I'll drive you back."
"No need."
Lin An said.
"I'll walk back and take a look at what the Jamaica Community is like during the day while I'm at it."
Patrick thought for a moment, then shook his head.
"You're a guest. How can we let a guest walk back?"
"All right, then."
Lin An turned and left. Patrick followed him, and their backs disappeared at the end of the hallway.
O'Brien walked over beside him and looked in the same direction.
Back in the office, Caitlyn was still sitting in the guest chair, looking toward the door Lin An had gone through. It was already closed.
Morales stood by the window, holding the unfinished glass of mango juice.
"Dad."
Caitlyn spoke.
Morales didn't turn around.
"Yeah?"
"I want to tell you something."
Caitlyn's voice was quiet, but serious.
"This man is a genius."
Morales turned to look at her.
Caitlyn leaned back in her chair, her hands folded over her stomach... in exactly the same posture as Morales.
"Did you hear the two questions I asked him just now? The Gaussian Copula and the Volatility Smile.
I spent two weeks in my Public Policy Course just trying to get a general idea of the first one. He explained it clearly in two minutes, and better than my professor did."
She paused.
"The second question, the Volatility Smile, was something I'd heard about from friends in the Department of Finance. I didn't even fully understand it myself.
What he said was... flawless. Every word was right, his logic was airtight, and he even added things I didn't know."
Morales walked back behind his desk and sat down.
"And then?"
"Then he asked me that question."
Caitlyn's mouth twitched.
"I couldn't answer his question about the basis for calculating capital requirements for Systemically Important Financial Institutions."
She looked at Morales.
"Dad, do you know how long it's been since someone stumped me?"
Morales thought for a moment.
"A long time."
"Right."
Caitlyn said.
"A long time. So long that I thought it would never happen again."
She leaned forward.
"A student ID can be faked, a passport can be faked, a visa can be faked, a Social Security number can be faked... but you can't fake math. If you don't know it, you don't know it."
She put heavy emphasis on the words "don't know."
"He was able to stump me, which means he knows a lot more than I do. A con artist might memorize a few terms and pretend to chat about them, but he couldn't find a blind spot in a field I'm unfamiliar with, then ask one precise question that leaves me speechless."
She paused.
"Because to do that, you have to truly understand the field. Not memorize a few formulas—you have to understand it. The kind of understanding where... you can close your eyes and see the whole framework, and know where every screw is."
Morales was silent for a few seconds, then asked,
"So what's your conclusion?"
"My conclusion is..."
Caitlyn drew a deep breath.
"He really is Professor Jero's student. Maybe his name isn't in the system, maybe his visa is still being processed, maybe he's staying with a Black friend in Jamaica, and everything about him looks wrong... but his mind is right."
She tapped her temple with her index finger.
"You can't fake that."
Morales leaned back in his chair, folded his hands behind his head, and looked at the ceiling.
After a while, he chuckled softly.
"When he stumped you just now, the look on your face..."
"Dad."
Caitlyn's voice suddenly rose.
"Don't say it."
"I just wanted to say..."
"Don't say it."
Morales swallowed the rest of his words, though the curve of his mouth remained.
He picked up the phone on his desk and dialed a number.
"Dispatch Center? This is Sergeant Morales... Yes, from the 103rd Precinct... Starting today, keep a closer eye on 108th Street, near 90-41...
Right, a priority area... No, it's not a high-crime area. An important person lives there... What important person? A good friend of the 103rd Police Department. He can help us with our taxes.
Right, so this friend is very important."
He hung up and glanced out the window again.
The police car Lin An had taken was already far away, blending into the traffic on Jamaica Avenue.
Morales set down the mango juice, picked up the K-1 form on his desk, and looked it over again.
"Negative twelve hundred."
He muttered to himself.
"Three hundred dollars."
He put the K-1 back in the folder, leaned back in his chair, and closed his eyes.
"Dad."
"Yeah?"
"Next time he comes to the precinct, let me know."
"Why?"
"I want to ask him a few more questions."
Caitlyn said.
"About macroprudential regulation. I'll look up some information and then talk to him about it."
Morales nodded.
"Okay."
Caitlyn pushed open the door and left.
Before you continue