Difference between pages "8.15" and "8.27"

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The problem reduces to Floyd - Warshall algorithm if you take logs of all currency-exchange rates, as if a * b = c then ln(a) + ln(b) = ln(c).
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In computational finance people often use logarithms of prices instead of prices themselves, as it gives faster calculations and makes it easy to apply log-normal distribution instead of normal distribution (log-normal distribution is more appropriate for asset prices).
  
  
 
Back to [[Chapter 8]]
 
Back to [[Chapter 8]]

Latest revision as of 14:12, 21 September 2020

The problem reduces to Floyd - Warshall algorithm if you take logs of all currency-exchange rates, as if a * b = c then ln(a) + ln(b) = ln(c).

In computational finance people often use logarithms of prices instead of prices themselves, as it gives faster calculations and makes it easy to apply log-normal distribution instead of normal distribution (log-normal distribution is more appropriate for asset prices).


Back to Chapter 8