tag:blogger.com,1999:blog-7801344413612447717.post1693568605110542878..comments2024-01-18T16:20:09.743+01:00Comments on Nils' Blog: MartingalesNilshttp://www.blogger.com/profile/06468755466492675831noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-7801344413612447717.post-68392658334067680242012-12-21T16:05:45.740+01:002012-12-21T16:05:45.740+01:00Your formula is wrong: 1+2+4+8...+N^2=(N+1)^2-1 ne...Your formula is wrong: 1+2+4+8...+N^2=(N+1)^2-1 needs to be 2^N and not N^2.Danielhttps://www.blogger.com/profile/03986097338831031974noreply@blogger.comtag:blogger.com,1999:blog-7801344413612447717.post-49997000611646536912011-08-21T14:37:53.333+02:002011-08-21T14:37:53.333+02:00The zero just changes the system from 50:50 to 18:...The zero just changes the system from 50:50 to 18:19 against you.<br /><br />This means that your expected profit is slightly negative and not zero. You can still use a martingale betting system to repackage the risk any way you want.<br /><br />You can still create a 'product' that has a very high chance to make a little profit and a very low chance of suffering a major loss.<br /><br />More importantly, the Roulette is just an example here to make understanding martingales and repackaging of risk easier.Nilshttps://www.blogger.com/profile/06468755466492675831noreply@blogger.comtag:blogger.com,1999:blog-7801344413612447717.post-56048648635108330922011-08-21T14:29:53.746+02:002011-08-21T14:29:53.746+02:00> Kring, the 0 is the bank. I ignored it for si...> Kring, the 0 is the bank. I ignored it for simplicity's sake.<br /><br />The 0 cannot be ignored because it's the reason why Martingales can't work. It's the crash where everyone but the bank looses.Kringhttps://www.blogger.com/profile/03128630042421602039noreply@blogger.comtag:blogger.com,1999:blog-7801344413612447717.post-68058766071188747472011-08-21T10:15:43.736+02:002011-08-21T10:15:43.736+02:00Azuriel, you shouldn't use this exact strategy...Azuriel, you shouldn't use this exact strategy in the stock market. But it shows what CDOs basically do. They restructure risk. Thus you can create 'AAA' derivatives out of sub-prime mortages.<br /><br />Hagu, this bias explains why there are always some funds who beat the market.Nilshttps://www.blogger.com/profile/06468755466492675831noreply@blogger.comtag:blogger.com,1999:blog-7801344413612447717.post-34195910681129046822011-08-21T08:24:34.918+02:002011-08-21T08:24:34.918+02:00Another issue is survivorship bias.
You incubate ...Another issue is survivorship bias.<br /><br />You incubate 10 funds and then look at them a couple of years later. Perhaps one or two are great, one or two do horrible... You shut down all the under performers and so even if you are picking stocks with a dartboard, you show a track record of above average performance ... on the ones still in business or that you talk about.Haguhttps://www.blogger.com/profile/03726885305104254286noreply@blogger.comtag:blogger.com,1999:blog-7801344413612447717.post-20669573058975299312011-08-21T01:11:49.139+02:002011-08-21T01:11:49.139+02:00I'm not sure that works in financial markets. ...I'm not sure that works in financial markets. While it <i>is</i> binary in the sense that you either make money or you don't (although it is also possible the stock price doesn't move at all), the actual odds that a stock price moves up or down is based on performance, the economy, and business-level decisions that are not 50/50 chances.<br /><br />Let's say I can have either pizza or tacos for dinner tonight. While you can either be correct in guessing which one I'll eat or not, in reality I might be inclined to eat pizza 75% of the time.<br /><br />Then again, I only took one Econ class so who knows.Azurielhttps://www.blogger.com/profile/16581263347888757710noreply@blogger.comtag:blogger.com,1999:blog-7801344413612447717.post-44329368121586269422011-08-21T00:54:42.263+02:002011-08-21T00:54:42.263+02:00Yes, the green 0 is the casino's extra supa du...Yes, the green 0 is the casino's extra supa dupa way of guaranteeing a nice profit.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7801344413612447717.post-86903031660347335592011-08-21T00:25:41.308+02:002011-08-21T00:25:41.308+02:00And then there's the 0 which isn't red nor...And then there's the 0 which isn't red nor black.Kringhttps://www.blogger.com/profile/03128630042421602039noreply@blogger.com