[youtube https://www.youtube.com/watch?v=YdDIsImNfBY&hl=en&fs=1&w=425&h=344]

“Never put off happiness for the sake of achievement. Never put off the things that are important for your well-being and satisfaction to a later time. Today is the day to live fully, not when you win the lottery or when you retire. Never put off living!”

Learning about probability distribution is pretty boring unless one knows how to relate these to at least some real life application. Well, that can be said about almost anything learnt in life .However in the case of probability distributions, it is strikingly more true. There is a fair chance that a lot of people know about normal,log normal, student t,weibull,poisson,Cauchy, exponential, chi-square ,brownian, gbm, levy, etc etc.. Somehow I have never found merely learning about these distributions interesting.

I came across so many references to this book that I finally decided to take a peek in to it. At the heart of it, the book is about Kelly’s criterion.A simple example made me motivate to read this book. If you know that you gain 50% with prob = 0.6 and lose 50% with prob = 0.4…AND…if you have X dollars, how much do you bet ?A naive strategy of using expectation over one step is dangerous.

While hacking some trading techniques, I came across an author trying to link Factor analysis and Arbitrage Pricing Theory(Ross). I was wondering the use for it . My thinking was a classic case of an empiricist. Today I came across a reference to a old paper which says the link provided has some meaning to it. It is always better to have some theoretical model before pca/factor analysis/ eigen value decomposition.