Parrondo Paradox

Discussion in 'Risk Management' started by hihi, Sep 5, 2007.

  1. hihi

    hihi

  2. MGJ

    MGJ

    It's vaguely similar to Shannon's Demon which is in wide use in professional money management today, hidden behind a suitably authoritative sounding name.
     
  3. Maxwell had such a demon, as well. Why not cut the crap and keep drawing your account down to that integer multiple and playing winning game B2 all the time?
     
  4. The article is misleading, particularly the reference to
    Maslov:

    "Dr. Sergei Maslov from Brookhaven National Lab
    had shown that if an investor simultaneously
    shared capital between two losing stock portfolios,
    capital would increase rather than decrease"


    Maslov showed no such thing, nor is what he did
    show (a version of Shannon's Demon) so complex that
    it cannot be applied to real trading.
     
  5. rickty

    rickty

    This issue was addressed in the book "A Mathematician Plays The Stock Market" by John Allen Paulos. If I remember correctly, the conclusion was that no Parrondo-type trading strategy exists.
     
  6. zdreg

    zdreg

  7. It sounds like all I have to do is trade any two securities any way I want and together they will show equity growth. That doesn't seem to happen to me though.
     
  8. hihi

    hihi

    No. Only when your strategies have the probabilities of the coins involved in the paradox.
     
  9. maxpi

    maxpi

    I guess they would have to be related in the way you played them or the way they behaved somehow.

    I was reading that article from the NYT and I got a funny feeling because the strategy that I am currently working out seems to be what they are describing to an extent. It is two games played on the same data, the market decides which one [or none] is played every bar, gains are locked in [ratcheted] during every bar.. it's a tremendously interesting subject that I feel [I can't say I really understand the theory very much so I use the word "feel"] could lead to some big up-jumps in typical gains for somebody...
     
  10. hihi

    hihi