**Subject: **Re: fuzzy finance

**From: **Paul Victor Birke (*nonlinear@home.com*)

**Date: **Fri Mar 03 2000 - 23:39:50 MET

**sorted by:**[ date ] [ thread ] [ subject ] [ author ]**Next message:**Pramit Sarma: "Re: fuzzy finance"**Previous message:**Will Dwinnell: "Re: fuzzy finance"**In reply to:**Philip E. Bennett: "RE: fuzzy finance"**Next in thread:**Pramit Sarma: "Re: fuzzy finance"**Reply:**Paul Victor Birke: "Re: fuzzy finance"

"Philip E. Bennett" wrote:

*>
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*> Paul, et al
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*>
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*> I've been monitoring this thread with muted interest. The discussion has
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*> bounced around and touched on many topics but the main interest seems to be
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*> in fuzzy vs probabilistic methods and their application to financial
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*> modelling/trading.
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*>
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*> As a private trader, former institutional derivatives trader, and a bit of a
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*> financial engineer I am concerned only with how well these techniques work
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*> to help me create workable models. I define a workable model has one that
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*> provides information so as to reduce the uncertainty regarding the
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*> interpration of a specific situation or the course of action to take. In
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*> this regard, IMHO, possibilistic (i.e. fuzzy logic) and probabilistic (i.e.
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*> neural nets, datamining, etc.) methods are complementary and HIGHLY
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*> synergistic! The use of GA's and SOM's to help fine tune the application of
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*> these methods are also benefical.
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*>
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*> Would it be appropriate to suggest that if you're interested in gaining more
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*> success in modelling you focus more on what can be gained from by using the
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*> methods together?
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**********************

Dear Philip

Well in fact that is what I had done at the time back in about 1996.

While I appear to be a bit one sided in fact I am not so.

I would agree with you fully here. There a loads of insights to be

obtain be sticking to formal Probability Theory and its offshoots. The

University of Guelph library has a number of books on subjective

probability assessment of uncertain prediction that derived in part from

the Cold War as just a for instance. I was most interested modelling

uncertainty in the marketplace. I became interested in the idea of

using or borrowing from Fuzzy Set Theory the UltraFuzzy Function. You

can roam around the UltraFuzzy using a Geometric Mean definition between

the lower and upper bounds. These bounds can also be interpreted as

probability limits.

So as an engineer Steal With Pride anywhere I can get ideas to obtain

some advantage. I am not stuck in the ground fuzzy person. I try to

use each where advantage.

In discussing this problem at work today I was reminded that Fuzzy has

shown advantage in Control Applications wherein a loop or control loop

is the key idea here. I will pass this along to Peter Hamer in a few

minutes. Probability Theory seems lacking in the control context. And

maybe why is failed should be highlighted.

all for now,

Paul

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**Next message:**Pramit Sarma: "Re: fuzzy finance"**Previous message:**Will Dwinnell: "Re: fuzzy finance"**In reply to:**Philip E. Bennett: "RE: fuzzy finance"**Next in thread:**Pramit Sarma: "Re: fuzzy finance"**Reply:**Paul Victor Birke: "Re: fuzzy finance"

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