maratikus Wrote: ------------------------------------------------------- > mwvt, I’m not an expert in the subject but I know > a little about it because of my math background > and trying to use it in trading. The theory > itself is beautiful but hard to apply in real life > in my opinion. This is what I thought. > > Mathematically chaos theory is nothing else but a > study of unstable points of deterministic dynamic > systems. I would suggest reading a little about > phase space as it is an extremely useful concept: > http://en.wikipedia.org/wiki/Phase_space > > You can also access free lectures on Chaos here: > http://ocw.mit.edu/OcwWeb/Mathematics/18-385JFall- > 2004/CourseHome/index.htm > > If you’d like, we can discuss the subject more in > depth. Pretty soon I will not know the answers > but, hopefully, I will still be able to point in > the right direction. I guess I am more interested in looking into it to learn more about the “risks I don’t know”.
mwvt9 Wrote: > I guess I am more interested in looking into it to > learn more about the “risks I don’t know”. The biggest risk is that it’s impossible to differentiate between a chaotic (deterministic) system and a stochastic (random) system due to finite data size. In theory they can be differentiated when the data size is infinite. As a result the model can be misspecified and led to incorrect conclusions.