Subject: Re: fuzzy finance -- NYSE "market making"
From: Doug Elias (firstname.lastname@example.org)
Date: Wed Mar 08 2000 - 19:56:53 MET
I had the pleasure of watching a video produced by NYSE that followed
a pair of market-makers around while deals on the stocks they
represented were being explored, the process they call "price
discovery". One of the significant issues involved in this process is
that of "how much information does the floor-rep make available to the
other parties, and at what point in the discovery process?" One of
the floor governors commented that an important factor in determining
how much information is presented by one side is how well known the
other rep is -- the more well-known *and trusted*, the more likely
that a larger amount of information will be revealed. This is
inherently fuzzy in nature, not probabilistic.
Watching a trade being explored, it is immediately obvious that
"probabilities", by their strict definition, have no role to play in
the process -- the reps themselves talk about "gaining an intuitive
feel", "learning how to gauge the market's reaction", and the like.
It's very clear that the kind of uncertainty that is prevalent in this
particular part of the financial world is most decidely not
realistically modelled by a probability distribution, at least not
while the process is active. And the curbs that have had to be
imposed on arbitrage engines, which at their heart are probabilistic
in nature, also indicate that this is not a methodology well-suited to
Doug Elias, Ph.D.
__|_ Internet: email@example.com
dr _|_)oug USmail: Director of Technology
(_| Parker Center/Johnson Grad. School of Mgmt.
(_|__lias 302 Sage Hall/C.U./Ithaca/N.Y./14853-6201
| Phone: 607-255-3521 Fax: 607-254-4590
This message was posted through the fuzzy mailing list.
(1) To subscribe to this mailing list, send a message body of
"SUB FUZZY-MAIL myFirstName mySurname" to firstname.lastname@example.org
(2) To unsubscribe from this mailing list, send a message body of
"UNSUB FUZZY-MAIL" or "UNSUB FUZZY-MAIL email@example.com"
(3) To reach the human who maintains the list, send mail to
(4) WWW access and other information on Fuzzy Sets and Logic see
(5) WWW archive: http://www.dbai.tuwien.ac.at/marchives/fuzzy-mail/index.html
This archive was generated by hypermail 2b25 : Thu Apr 06 2000 - 15:59:48 MET DST