Difference between pages "8.23" and "8.27"
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(Created page with "The problem reduces to Floyd - Warshall algorithm if you take logs of all currency-exchange rates, as if a * b = c then ln(a) + ln(b) = ln(c). In computational finance people...") |
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+ | The problem reduces to Floyd - Warshall algorithm if you take logs of all currency-exchange rates, as if a * b = c then ln(a) + ln(b) = ln(c). | ||
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+ | In computational finance people often use logarithms of prices instead of prices themselves, as it gives faster calculations and makes it easy to apply log-normal distribution instead of normal distribution (log-normal distribution is more appropriate for asset prices). | ||
Back to [[Chapter 8]] | Back to [[Chapter 8]] |
Latest revision as of 14:12, 21 September 2020
The problem reduces to Floyd - Warshall algorithm if you take logs of all currency-exchange rates, as if a * b = c then ln(a) + ln(b) = ln(c).
In computational finance people often use logarithms of prices instead of prices themselves, as it gives faster calculations and makes it easy to apply log-normal distribution instead of normal distribution (log-normal distribution is more appropriate for asset prices).
Back to Chapter 8