Math in finance or vice versa

Archive for January 2011

Quantum Mechanics and Market Observables

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Quantum mechanics has quite powerful notion of observables. They are just properties of system state that can be determined by measurement process. Let’s recall main principles of quantum mechanics and how they could be applied to markets.

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Written by fxpaul

January 15, 2011 at 10:53

Common trading task – Part 1

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Stochastic process

As Wikipedia suggests, a stochastic process is a random process, the counterpart to a deterministic process. For our simple tasks all we need is a time series, i.e. for each moment of time we have only one random value, or price: P(t). The process has a definite starting point P(0) but its further evolution has some degree of uncertainty described by probability distribution.

A lot of types of stochastic processes has been studied in mathematical literature. In this article I use only Itō processes as they provide quite good approximation of price dynamics.

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Written by fxpaul

January 3, 2011 at 12:00

Posted in trading math

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