Book: The Misbehavior of Markets

OddTrader · Nov 1, 2005

"Outline of the Bank of Japan's Foreign Exchange Intervention Operations" and
"Systems of Foreign Exchange Intervention Abroad"
http://www.boj.or.jp/en/about/basic/etc/faqkainy.htm

Firstly, they don't Like to manipulate, but they often do actually Intervene.

Q
A Day in the Life of the Bank of Japan's Foreign Exchange Dealers

-- Written by Masafumi Yamamoto, Foreign Exchange Division

It is often the case that foreign exchange rates fluctuate abruptly due to unexpected factors. This means that the market has to be analyzed from the standpoints of various areas such as macroeconomic analysis, time-series analysis (which requires sophisticated econometric methods), historical studies, political analysis, and even astrology. Thus, we have to keep on obtaining and analyzing information throughout the day.

UQ

Secondly, (mathematical) time series - sophisticated econometric - methods are in fact constantly used daily.

nononsense · Nov 1, 2005

Quote from OddTrader:

...
Secondly, (mathematical) time series - sophisticated econometric - methods are in fact constantly used daily.

Many people at ET do to.
Not being given anything else, I would be careful in using "sophisticated (econometric)" in this context. I think "profitably" would have to come first before babbling about "sophisticated". If it's not profitable, it's garbage. This applies to Japanese Banks too.

OddTrader · Nov 1, 2005

Quote from nononsense:

Many people at ET do to.
Not being given anything else, I would be careful in using "sophisticated (econometric)" in this context. I think "profitably" would have to come first before babbling about "sophisticated". If it's not profitable, it's garbage. This applies to Japanese Banks too.

I think you've made a good point. I don't know whether all the banks make any profits. Probably some (IB) do.

However, you should know well that there are few big issues being discussed here that could directly impact us for making profits or otherwise.

nononsense · Nov 1, 2005

Quote from hypostomus:

... A Cray would probably still be grinding out a fancy solution.

hypostomus,

Would it be the same for a quadruple Opteron contraption?

hypostomus · Nov 1, 2005

Haha! My test is that if any real-time code makes my 1.73 GHz laptop break a sweat, it's WAAAAAAY too complicated. The most intensive thing I ever coded was an NQ adaptation of Jack's hINDU-ESe Stretch-Squeeze using a self-adaptive tick-by-tick calculation of a synthetic $NDX. It periodically choked the CPU and was totally fucking worthless. Simple is best. VWAP is one of my most useful tools, and it takes all of 17 statements in .efs. Determining if NQ is responding to oil take 46 statements. The most powerful tick-rate moneymaker I have has only 40 statements. But then I am old and stupid, and obviously never was the mathematician that Nitro thinks he is. But he could prove to me how smart he is if he could explain SCT to me.

jficquette · Nov 1, 2005

Quote from nitro:

Market action almost certainly is on some sort of multi-handle sphere, also known as a n-torus. The torus is almost certainly non-commutative.

Also, most market analysis is done on Hilbert Spaces. That is probably also incorrect because market-time is not well defined or well encapsulated by this space.

nitro

The market has the same properties as fluids. That's my story and I am sticking to it. (g)

John

nononsense · Nov 1, 2005

Quote from jficquette:

The market has the same properties as fluids. That's my story and I am sticking to it. (g)

John

How do you wring money out of them with your insight? Like water out of a rag? Wouldn't work for me.

nononsense

hypostomus · Nov 1, 2005

PV=mRT

nitro · Nov 2, 2005

Quote from jficquette:

The market has the same properties as fluids. That's my story and I am sticking to it. (g)

John

IMO the correct space to embed the study of market dynamics is closer to the abstract spaces being studied in the attempt at unifying the Geometry of General Relativity with the Algebra of Quantum Mechanics. Hopf Algebras are as close as we get today (though a Hopf Algebra structure of the non-commutative torus is not known), but even that is probably still not quite the right (abstract) space. I really doubt anything built on the house of Hilbert Space is correct because I believe that the time coordinate cannot be correctly parameterized there.

That means non-commutative Geometry. It is astonishingly difficult mathematics, even for the pro's that do it for a living.

That you think it is a fluid is not necessarily wrong, but turbulence is probably what you had in mind when you think fluid.

nitro

dont · Nov 2, 2005

Quote from nitro:

That means non-commutative Geometry. It is astonishingly difficult mathematics, even for the pro's that do it for a living.

That you think it is a fluid is not necessarily wrong, but turbulence is probably what you had in mind when you think fluid.

nitro

IMHO you are almost certainly right about the non-commutative algebra part. The beauty of those geometry's is that they imply an uncertain relationship al la Heisenberg, so probability enters as a function of the geometry not an ad hoc enforced assumption.

But as you say the mathematics is very difficult.

We need a proponent of the field to simplify it for the rest of us.