You haven’t read my text. It’s a pity. I have to repeat my argumentation here. But... I still want to know if there is any flaw in my thinking, and I hope you will finally spend the 20-30 minutes needed to read my article. And maybe, you will even think about it one evening? So, let’s try again:
Itô calculus, named after Kiyoshi Itô, extends the methods of calculus to stochastic processes such as Brownian motion (see Wiener process).
Good point. I forgot about it. But it is an advanced lemma, having many detailed mathematical constraints. Perhaps the Brownian motion fulfills them all. But the asset price path is not a Brownian motion. It is not a result of the laws of physics. It may look similar, but it is not enough to consider the application of Itô calculus to the asset price as scientific. I do see the difference between practitioners (who use what they have) and scientists (who should promote the real science).
In probability theory and statistics, kurtosis (from Greek: κυρτός, kyrtos or kurtos, meaning "curved, arching") is a measure of the "tailedness" of the probability distribution of a real-valued random variable.
Again “random variable”. You may try to use the probability to data, which you do not know if it is random or not. But using it to data, when you know
it is not random (in many cases, at least) is deceiving. Yourself and others. Of course, only if you consider yourself a scientist. If you call it science. You may calculate the variance of the post codes in your region. If you see any practical application of such move. But do not call it science.
“but a number of prominent ones have made significant contributions to finance, including a certain Paul Wilmott...”
That’s right. It is also true for many rocket scientists, physicists, and so on. The finance sector pays well. But does it prove anything? I do not question their achievements in mathematics. I do question the application of the probability theory (and mathematics in general) to the world of the human minds. I suspect, Paul Wilmott knows, that such application is not very scientific (to put it mildly). But thinking realistically, I cannot hope he will admit it openly.
“And technical analysis is to finance what astrology is to astronomy.”
An interesting comparison. I’ll put a longer wiki citation here:
Technical analysis -
In finance, technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable.
It sounds very scientific. Don’t you think so? I suppose there must be many universities, where professors teach such knowledge. Otherwise, how could it stay on wiki for so long? How could it get there in the first place?
Are they all lunatics? Why don’t they see the obviousness?
If the quant math applied to finance would be like math applied to the universe (=astronomy), then why would scientists still use and develop the “finance astrology” (=tech analysis)? Why such things do not happen in physics?
Perhaps the quant math is not the astronomy of finance? Maybe it does only seem so?
Questions. Questions. Questions.
Very dangerous questions for someone so sure of what is right and what is wrong.
Perhaps, here is an answer:
Perhaps, it is the true answer?
But you would have to lose 25 min of your life on reading it…
Is it worth doing?
Maybe it is better to stick to what you know already?