It is customary to think that financial theory cannot have the rigor of other sciences since everything in it has probabilistic character and nothing in it can be strictly proven or disproven. Financial models are mainly built out of logical consistency, which is considered sufficient to establish a level of validity. Yet, there seems to

TRADE AS PRICE MEASUREMENT Measurement is a fundamental process of quantitatively determining attributes of an object, event, or phenomenon, playing a central role in various disciplines and providing the basis for objective and reproducible information. In the realm of finance, a crucial question arises: What exactly do we measure? The primary focus of measurement in

A security deviating from its fair value experiences an order flow imbalance trying to bring it back to the fair value. That imbalance corresponds to a soliton solution of the Market-Maker’s Equation. Read about it in our paper. Here is a soliton* dragging behind the “Radisson Royal” boat on Moscow River. Made the video myself years

One of the most discussed questions in quant world is price movement prediction or signal generation. It is also one of the most frequent questions that I hear from the general public. Due to publicity created by the media, this is what the public thinks that financial profession is all about. I tell my clients

I was recently asked to tell one challenge that small and medium businesses have in managing their finances.   Speaking of challenges, there is one that has been responsible for putting numerous companies out of business, yet it remains underestimated: hedging financial tail risk. For instance, a chocolate producer would hedge against rising cocoa bean prices