Theory of Interstellar Trade 1978??
"It should be noted that, while the subject of this paper is silly, the analysis actually dose make sense. This paper, then, is a serious analysis of a rediculose subject, which is of course the opposite of what is usual in economics"
Professor Paul Krugeman had an excellent point. Most ideas in mathematical finance today are on very serious subjects but often with rediculouse solutions based on a lot of unrealistic fantasy assumptions. Continuous dynamic delta hedging to argue for risk neutral valuation is just one of them (that fails completely in practice). Spacetime-finance on the other hand is extremely robust, but yes it is on a silly subject with few if any practical implications of todays only global economy (but yes practical measurable).
From the paper it looks like Professor Paul Krugeman now at Princeton University even got a grant to look into this topic, more grants should be given to such crazy topics.
While Paul Wilmott thinks it is the end of the world if we get alian visitors (see his blog) I am a great optimist and think this will be the time when we go from global-economy to a universe-economy, and yes spacetime-finance will then be of great importance.
I have not yet got time to look into his paper in detail. All I know is that I once got my invitation from a from a academic instititutions withdrawn once I mention would prefer to talk about Space-time finance. Good to see that the very best universities are a bit more open minded ;-)
So then I am not the only crazy person on this planet !!!
hemm in the 1978 paper there is a reference to a 1987 paper by same author, how is this possible???? is this paper a practical joke or is the 1987 reference simply a time-travel joke? Well Paul Krugman just told me the 1987 reference just was a time travel joke, so no time travel machine (at least not of this magnitude) yet then.
Layers of wisdom?
What can I say? A good book should have more than one layer of wisdom ;-) I have to warn you, those seeking the true alchemy of derivatives will easily get lost and never get out of the labyrinth of option pricing formulas. If you not have the knowledge to enter the labyrinth you better not walk in.
Quants do not do Da Vinci Code we do Computer Code, some do VBA, some do C++ and the most Geeky ones do Pure Code ;-) Most quants understand C++ or JAVA, but few of them know ancient code.
Reminded of Hidden Conditions and the Origin of Hedging
Suddenly I hear what I think is an explosion just outside my door. I run out to see what it is. My neighbor had just parked her car inside her solid garage, but inside the garage she almost got hit by a car. A new BMW had just gone through her fence on back side and then almost through wall. Unlikely and completely outside most people’s probability distribution, this was also outside my probability distribution....
A tree was taking most of the hit... in the old times they built solid hedges sometimes even using trees!! at that time to protect agains cattle and wild annimals, but it also works for wild BMW's......recommended literature : Caldwell's 1870: "Treatise on Hedging"
From Preface: "His expereince has thought him that there is no one subject of such vital importance to all classes of our fellow-citizens as this subject of Hedging."
Just as true today as it was then!!! I am not sure what would have suprised Caldwell most if he could travel into the the future(that is the present): Hedging actively used for volatility swaps, or his old hedging method working well agains wild BMW's in the hedge fund capital....the world is always changing, but the main principle of hedging stays the same!
