What is the most important mathematical idea in stock trading?  

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RandomQuant
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Joined: 5 months  ago
Posts: 55
23/01/2017 5:27 am  

Summary


  • 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"

Link


https://www.quora.com/What-is-the-most-important-mathematical-idea-in-stock-trading

Edited: 4 months  ago

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