Abstract
In finance one has to deal with a series of prices that are of a random nature. The problem of the trader – or of the investor – is to extract the signal buried in noise – if it exists – that is, to identify the stochastic process that best identifies it.
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Notes
- 1.
Sometimes, also the volumes exchanged at a certain price have to be considered.
- 2.
This is not the only definition of probability, although all the definitions satisfy the so-called axioms of Kolmogorov (Gnedenko and Kolmogorov 1954).
- 3.
This is another definition of probability, called frequentist, but also this one, as mentioned, respects the Kolmogorov axioms. In certain conditions the two definitions are equivalent.
- 4.
Or inserted using the worksheet commands.
- 5.
Assuming that we can (and want to) distinguish – for example, by the colors of the dice – the event 3,4 from the event 4,3. Otherwise, if the two events were indistinguishable, the probability would be 1/36 only.
- 6.
Remember once again that the worksheets will be sent free of charge to anyone who will request them from the author (renato.dilorenzo1@gmail.com), accompanying the request by any proof of purchase of this book: a photograph of the bill taken with the phone, for instance.
References
Feller W (1968) An introduction to probability theory and its applications, vols 1 and 2. Wiley, New York
Gnedenko BV, Kolmogorov AN (1954) Limit distributions for sums of independent random variables. Addison-Wesley, Cambridge
Spiegel MR (1975) Probability and statistics. McGraw-Hill, New York
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© 2013 Springer-Verlag Italia
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Di Lorenzo, R. (2013). Processes. In: Trading Systems. Perspectives in Business Culture. Springer, Milano. https://doi.org/10.1007/978-88-470-2706-0_1
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DOI: https://doi.org/10.1007/978-88-470-2706-0_1
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