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Non-Tech : Derivatives: Darth Vader's Revenge
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To: EPS who wrote (324)10/4/1998 12:44:00 PM
From: ahhaha  Read Replies (1) of 2794
 
As a mathematician I'm familiar with all the details of the abstract machinery. During the '70s I wrote equations and computer programs to extract advantages from expectations. Ah, there's the rub.

There exists in a fair game of Blackjack a way of playing such that the player can achieve a positive expected return. With enough repeated trials and a deep enough pocket to cope with a non-systematic negative run, you can gradually build a fortune. However, there is autocorrelative feedback. I know it, therefore other mathematicians know it. The casinos couldn't handle all the traffic if it got out that you could expect to win. They would soon go broke. They have to change the rules. The house must stay open and pay its bills. In the old days they would simply have a cocktail waitress spill a drink on you to disrupt your concentration. Then they asked you to leave when the overseers noticed methodology. Now they changed the rules so that the player has a negative expected return.

Same process has occurred repeatedly in Wall Street. The whole idea is based on the a priori mistaken idea of getting something for nothing. People do 100 times more work trying to get something for nothing in comparison with just having a day job. I believe this occurs because it is a pathology arising from being raised in poverty. The great trader, Jesse Livermore, was destroyed when after the '29 crash, the government changed the margin rules. Actually he went broke because he came back too early and bought low, then couldn't take a loss because he knew he was right. He was, but it took time and he didn't have time because he was on margin.
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