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Financial Markets Dynamic Distribution Function, Predictability and Investment Decision-Making (FMDDF)

In: Practical Fruits of Econophysics

Author

Listed:
  • Gregory Chernizer

    (Financial Market Universal Dynamics, Inc)

Abstract

Summary FMDDF system based on the basic scientific ideas from Physics and Economics involved in the procedure for the dynamic probabilistic distribution function of the state (PDFS) derivation for any financial market (FM). Price moving process defines dynamic FM. Price movement is defined by the volume imbalance V. The necessary condition for the dynamic FM is V ≠ 0 at the same price, while the sufficient condition is defined by nonzero price volatility σ. The total probabilistic distribution function of any FM is the sum of the two incompatible terms: the regular probabilistic distribution function (PDF) containing the mean value and PDFS. PDFS structured based on the adiabatic integrals of FM motion that include the existing or expected volume imbalance, price volatility and amount of shares or contracts. PDFS is not path dependable (the new trajectories’ invariant principle) in the special economic space E{ξ}. This fact is important in financial engineering, risk control, quantitative FM predictability and investment decision-making.

Suggested Citation

  • Gregory Chernizer, 2006. "Financial Markets Dynamic Distribution Function, Predictability and Investment Decision-Making (FMDDF)," Springer Books, in: Hideki Takayasu (ed.), Practical Fruits of Econophysics, pages 126-130, Springer.
    • Handle: RePEc:spr:sprchp:978-4-431-28915-9_22
    DOI: 10.1007/4-431-28915-1_22
    as

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