What is the most important mathematical idea in stock trading?
- James Simons said "mathematics" is most important thing in stock trading
- "All models are wrong, but some are useful" because they make you think about how the world works.
- "The earth is spherical" this isn't strictly true, but thinking about the earth as round rather than a cube is "good enough" for a lot of things.
- For stock one critical idea is the "efficient markets hypothesis"
- Markets are not perfectly efficient, but assuming that they are will let you to investment strategies that work more or less
- For derivatives the most important idea is "risk-neutral pricing"
Edited: 4 months ago