Abstract
In 1993 the Long-Term Capital Management (LTCM) hedge fund was created, most notably including Myron S. Scholes and Robert C. Merton who would later win the Nobel Memorial Prize (the so-called Nobel Prize in Economics).
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Notes
- 1.
An option is the right to buy or sell stocks or some other financial instrument at some price at some point in time.
- 2.
See Appendix D for a clarification of \(x \sim \mathcal{N}()\) notation.
- 3.
- 4.
The Cauchy distribution is essentially a symmetric, two-sided heavy-tailed distribution. The Cauchy distribution was used in Figure 9.7, since its symmetric form leads us to expect a mean at zero. In practice the Cauchy distribution is encountered relatively rarely, and we will focus on regular power laws.
- 5.
See Problem 9.15 for a related discussion on power laws, policy focus, and homelessness.
- 6.
Or “scale free,” meaning that \(z\) has no characteristic scale. Scale free-ness is a hallmark of complex systems, as we will see in Chapter 10.
- 7.
The article can be found online; a link is available from the textbook reading questions pagetextbook reading questions page.
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Fieguth, P. (2021). Power Laws and Non-Gaussian Systems. In: An Introduction to Complex Systems. Springer, Cham. https://doi.org/10.1007/978-3-030-63168-0_9
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