Gaussian Processes??

Well, since nearly the entire options world is based on GBM, and GBM is based on Gaussian processes, I guess the answer for me and every option trader in existance is, yes.
 
the black model uses a normal distribution and can be derived using high school mathematics in an hour or so.

Lets assume you have n orders placed and y are buy order and n-y are sell orders. If you clump enough buy orders or sell orders in a small enough time interval the stock will abruptly rise or fall by a certain percentage. Multivariate analysis can help you compute the probability of a resulting change in stock price using the via energy level equation.

http://i39.tinypic.com/2vdo4r5.jpg
 
Thanks guys. I think GP models are great to do dimensionality reduction but I am not sure of their generalization capability in nonstationnary conditions. Any idea on that?
 
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