MONEY MARKET MODELS AND STOCK DISCRET TIME MARKET MODELS

摘要

In this paper common stock and money market models are investigated, extended and discussed. Market prices depend on the choices and decisions made by a great number of agents acting under condition of uncertainty. It is therefore proposed to treat the prices of assets as random. We report models developments that reduce the risk of investing in stock market, while increasing long-term returns. A central problem with developing predictive models based on past market performance is the future market actions may not mimic the past. Financial situations never encountered by the market in the past, combined with new market-making technology, new modes of information communication and exchange, the interactions between derivatives trading and trading in other financial market, making mathematical methods that would have worked in the past fail in the present. If there is any fundamental nature acting in the market, then it should be possible to invent models that work well under all conditions, in all markets. We would expect such models to return high profits in bullish market phases, and neatly sidestep the biggest losses in bearish phases. The main objective remains the maximization of the profits.