Beliefs-Preferences Gauge Symmetry Group and Replication of Contingent Claims in a General Market Environment

by Valery A. Kholodnyi

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• Format: Hardcover
• Language: English
• ISBN: 0966303210
• ISBN13: 9780966303216
• Release Date: January 1995
• Publisher: Ies Press
• Length: 436 Pages

Customer Reviews

Applies theory from modern physics to financial analysis

Although I am not specialized in the field of financial analysis, I believe that it is important and useful to quantitatively describe financial phenomena. Therefore, this new theory and new method will certainly contribute to the establishment of a standard model of financial analysis. I hope the publication of this book will help people to understand, improve and apply the theory, introduced from modern theoretical physics by the author, for practical application in financial analysis.

Identifies new concepts, tools & applications for finance

The recognition of patterns in natural systems is the most significant step towards the full understanding of the dynamics of such systems. In the context of financial markets, the degree to which one appreciates these dynamics is the degree to which one is profitable. Beliefs-Preferences Gauge Symmetry Group and Replication of Contingent Claims in a General Market Environment not only identifies the key concepts in the understanding of the financial markets, but also lays out a rich display of tools and applications with which to analyze financial phenomena. From the book's outset, the emphasis is on the role and formulation of mathematical symmetries, which govern the evolution of quantities such as derivative payoffs or prices in the marketplace. The key concept is summarized in the words of the author when he conjectures that, "the absence of some type of arbitrage opportunity in the marketplace indicates the presence of a certain inherent symmetry." From this powerful observation, he proceeds to formulate the active degrees of freedom in the market (i.e. the market participants) and the symmetric implications of this statement. The identification of arbitrage opportunities, that is, the practical application of this observation, comes straight from basing oneself in this non-varying quality of the market and seeing where deviations exist. As such, Dr. Kholodnyi's book is a gift to financial practitioners. Only when one knows what the market should be doing can one appreciate the instances when the market is behaving in an unusual fashion. Considered in a wider sense, the tools laid out in this text demonstrate the power of the symmetry principle. Physicists have long been accustomed to using gauged symmetries in the analysis of high-energy phenomena. By using the same techniques to understand an area as applied as the financial markets, Beliefs-Preferences Gauge Symmetry Group and Replication of Contingent Claims in a General Market Environment heralds the dawn of potential new technologies for such disparate areas of science as quantum mechanics and biological systems.As these techniques mature in the sense of becoming widely available financial tools, Dr. Kholodnyi's book will become the standard text for a rigorous analysis of financial phenomena. The text requires a strong mathematical background and some familiarity with mathematical rigor. However, since rigor leads to reliability, the viability of any financial strategies will ultimately depend on the understanding of the tools laid out so cleanly in this text.

Book introduces powerful tools from physics into finance

Dr. Valery Kholodnyi's book, "Beliefs-Preferences Gauge Symmetry Group and Replication of Contingent Claims in a General Market Environment" is a remarkable work, from the innovative principal idea to the precise development of the details. The book can be complimented both for its overall depth of presentation and structure. Starting from a very general new model of the market environment, the author sets up a formal algebraic system that allows the powerful tools and fundamental principles of symmetry from physics and math to be used. This approach also shows the way to potentially formalize other sciences that are traditionally thought of as being less suitable for rigorous mathematical treatment.For me it was also impressive to observe the structural organization of the book. The necessary financial and mathematical background material is reviewed prior to its use, so that the work can be appreciated on its own even by readers with less experience in group theory or other mathematical tools used in the book. The presentation of material is clear and precise throughout the book, with continuous and logical development of ideas --not a "given" among the books of this type and certainly an impressive indication of the author's writing skills and the amount of work put into the book.I hope the book will continue to find a good response among the financial professionals for whom it is intended.