LostInNerSpace
New member
- Joined
- Jan 25, 2008
- Messages
- 1,027
- MBTI Type
- INTP
4) The central limit theorem, linear regression and other reasons the Gaussian is so "natural"
Useful but often used inappropriately. Ygolo, I recall you mentioning options trading. I'm sure you are aware one of the assumptions of Black Scholes is that financial prices are normally distributed. This has been shown to be incorrect. The distribution of prices might be leptokurtic but that does not mean they are normally distributed. People often try to compensate for that leptokurtosis with the log normal distribution. But the pervasiveness of Black Scholes itself probably makes it useful for valuing option premiums. According to Benoit Mandelbrot the Levy distribution might be more appropriate for financial prices. Probability and statistics is the only area of math for which I have had a real practical need. That will change before too long. The plans I have for my software will motivate me to study Math in more depth.
The way I work is to identify something that could be useful. I look for an overview to get a sense for what I can do with it. Then once I learn it I often find more uses and it leads me to look into other related things. It is a painstakingly slow process because I am forever going off on tangents.