Re: fuzzy finance


Subject: Re: fuzzy finance
From: P.G.Hamer (P.G.Hamer@nortelnetworks.com)
Date: Thu Mar 02 2000 - 15:38:59 MET


Paul Victor Birke wrote:

> <snip>

> It is kinda back to the poison water bottle definition of membership
> versus probability. While for that story it is clear, it may not be so
> clear in other contexts, the distinction between membership and
> probabiltiy.

As an occasional lurker, the poison water example does /not/ seem
to preclude a probabilistic model. Just model the probability that a
panel/oracle would judge the water as poisonous.

How do you know these probabilities? Sounds like the same
sort of problem as determining membership functions.

I'm not trying to convert the world to the use of probability. I do
have a long-standing problem trying to get any sort of handle
on fuzzy. The literature has a tendency to say that you cannot
address some sorts of problem with probability [eg the poison
water example]. As I believe that you can, I find this argument
totally unconvincing. I really need to see how the performance
of the fuzzy solution compares to that of the probabalistic one.
Where performance can include both accuracy and computational
simplicity. Or have the incorrectness of my belief exposed.

> Like I mentioned before, I look at pricing philosophically
> in a Fuzzy Setting. Personally, I am more happier there than placed in
> sort a roulette wheel Probability Theory Setting.

As an observation, this sounds awfully like the Bayesian/frequentist
positions in statistics.

 Peter

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