Would you play this game with me? You are allowed to choose any two numbers between 1 and 100. You reveal to me one of the two numbers. Now, I must say whether the second number is greater than the first one. If I guess correctly, you owe me $99. If my guess is wrong I owe you $101. So, would you play this game with me? Ninna
Interesting question, Assuming your methodology is to guess greater from shown numbers less or equal to 50, less for shown numbers greater than 50. Which means, the only time I would win would be if both numbers are N1,N2 <= 50 or N1,N2 > 50, and I show the number closer to 50. So case1, N1 <= 50. Chance of N2 <= 50 is 50/100 or 50%, case2 N1 > 50, Chance of N2 > 50 is 50/100 or 50%. So assuming the above logic is accurate, I have a 50% chance of winning, which means given the imbalance of payout, I should have positive expectation. Mind explaining what I'm missing?
Believe not not (since nothing is absolutely deterministic or absolutely probabilistic): Deterministic=Probabilistic. The real world is Deterministic+Probabilistic!
Deterministic => One possible outcome based on a given state Probability => Multiple possible outcomes based on a given state Probability fundamentally does not exist within a deterministic universe.
That is: Complexity! http://en.wikipedia.org/wiki/Complexity " Some definitions key on the question of the probability of encountering a given condition of a system once characteristics of the system are specified. Warren Weaver has posited that the complexity of a particular system is the degree of difficulty in predicting the properties of the system if the properties of the system's parts are given. In Weaver's view, complexity comes in two forms: disorganized complexity, and organized complexity.[1] Weaver's paper has influenced contemporary thinking about complexity.[2] "
Watch the "Trillion Dollar Bet" The story of the mathematical formulas that transformed capitalism and the world. Part 1 http://www.moneytec.com/forums/media.php?do=details&mid=74 Part 2 http://www.moneytec.com/forums/media.php?do=details&mid=75 Part 3 http://www.moneytec.com/forums/media.php?do=details&mid=89 Part 4 http://www.moneytec.com/forums/media.php?do=details&mid=90
In the context of trading, whether a price movement be Probabilistic or Deterministic, that's a question? http://en.wikipedia.org/wiki/Pin_risk_(options) " Pin risk occurs when the underlier of an option contract settles close to the option's strike value at expiration. In this situation, the underlier is said to have pinned. The risk to the writer (seller) of the option is that they cannot predict with 100% accuracy whether the option will be exercised or not. Therefore, the writer may end up with a residual position in the underlier. There is a chance that the price of the underlier may gap adversely, resulting in an unanticipated loss to the writer. In other words, an option position may result in a large, undesired risky position in the underlier on the Monday following expiration regardless of the actions of the trader. "
I won't spoil the fun here, but, I would highly recommend everyone new to trading attempt to design a "random" trading system before they go off and try to design a conceptually sound system. Learning how to work with random distributions is invaluable to proper quantitative analysis. Lots of potential lessons can be learned from coin flips, some of which have been spelled out in whisky's thread. But, the best way to learn is to do it yourself, i.e. make the mistakes and figure out why. If anyone wants to re-investigate some of the ideas in whisky's thread, let's do it... maybe it will generate some new ideas. That and I've been kinda bored lately...