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LOL Peter. You are determined to make this into
a Ph.D. thesis. I will only add a few comments and let you get on with
your life's work:
<BLOCKQUOTE
>
snip
Sheldon Natenburg" Beyond the question of exact
distribution..the normal distribution has one serious flaw..its symmetrical"
p61Option Volatility and Pricing
Secondly Black Scholes uses normally distributed BUT
its a continuous time model and assumes volatility is constant over the life
i.e continuously compounded. The effect of these two assumptions is that
possible prices are LOGNORMALLY distributed. This is how they intoduce
leptokurtosis (fat tails).
Yes, my fingers ran ahead of my head,
which is not unusual. We don't want negative prices do we, so yes my
comment should have said lognormal or binomial or something along those lines,
which within the accuracy of this stuff does not change anything.
Whether or not there is a known basis for Gann's Square of 9 it doesnot
detract from the fact that it works, and absent any evidence to the contrary
it reasonable to assume that it will continue to do so for at least 60 more
years ;-). It is in the same category as all other technical analysis
tools in which we have correlations but no known
cause.
snip
If techniques are to be used such as Gann with
implicit assumptions it is important to understand them.
snip
What do you mean by understand?
If by understand you mean the reason for the technique working then you are
wrong. Nobody understands any technical analysis in that sense, and
need not in order to use it profitably. If you mean understanding
in a practical utilitarian sense then I agree. In this regard, the
assumptions (as you put it) pertain to knowing the appropriate boundary
conditions (e.g., time, volatility, phase of moon, etc.) for which the
analysis works. We have correlations and that is all. Not an
exercise for theoreticians, but one for a bunch of laboratory
grunts.
snip
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