mandelbrotian randomness in finance, examples of practical uses?

[hapaboii]

Sorry dude, but I find it hard to believe that you've managed a fund for the past 15 years. Perhaps you are an independent trader, but I can't believe someone with a strong institutional background would make some of the comments you've made. No offense though, I don't think that means you are somehow worse off for it.

You said that Taleb's blabberings are common knowledge to options pros and that you'd recommend FBR to newbies. You are right in that Taleb is just a marketer who has created his own little niche by espousing crap through his writings.

I'd say that most practicioners realize Taleb champions the very useless strategy of buying deep OTM options on the assumption that the market underprices them. So he likes to bleed to death. We saw how well that went with Empirica. Proponents might argue that this doesn't prove his strategy doesn't work - they will say that given enough time, if all these far OTM options are underpriced, then in the long run you are +EV to buy them. There's no denying that deep OTM options are hard to price, and as such, often mispriced, but I don't think one can say that they are always or even generally underpriced.

I won't guess at the statistics but I do agree that the majority of hedge funds are skimming ops or something of the like.

Regarding liquidity and efficiency, I think you are right. In general, the more liquid, the more efficient. But there are definitely trading edges to be had in liquid markets. Pseudo market-making black boxes in liquid futures markets come to mind.

If you think corruption and insider trading in the US is bad, look at international markets. The US is probably the least corrupt.

Oh and on a side note, isn't Elliot Wave based upon fractals? I think RN Elliot beat Mandelbrot to the punch.

[DcifrThs]

i don't know if RN Elliot beat mandelbrot to the punch or not, but mandelbrot spent his life generalizing, specifying, and promoting his model.

i call it his model because he seems to give TONS of credit to other authors when due. one of his papers got rejected by a journal b/c "it didn't say anything new" since there were so many cites.

so this model that he named and developed imo is his.

the multifractal model he developed is extremely impressive. it is "multi" fractal because it scales both with price changes and in time. big price changes look like smaller ones that look like smaller ones. trading time goes 'faster' when there is a lot of action and 'slower' when there is less action regardless of actual clock time.

i haven't worked through the math yet so my understanding is still superficial. but the results spreak for themselves, he can recreate real world price changes with a model backwards and forwards.

so while he may not have been the first to the punch, he moved the theory forward significantly.

Barron

[DcifrThs]

BUMP for RM+ to respond to points outlined above in my response to his latest post on the subject.

thanks in advance for your time,
Barron