[FRIAM] cognitive largess (was Re: reductionism)

[Marcus G. Daniels]

Glen E. P. Ropella wrote:
> You can't cleanly separate the machinery from the users
> of the machinery.  It's not a "system" if you do that. [grin] Just
> because we have complete and precise understanding of some particular
> (separable) aspect of a system doesn't mean we can predict the behavior
> of the system.  It takes a complete and precise understanding of
> multiple aspects (or a single aspect that accounts for some large
> percentage of the system... say 80% ... but it's questionable whether
> the concept of a "large aspect" even makes sense).
>   
Right, in this case the trading book has a public interface and some 
physics that come from its rules.
I'm not saying that understanding those physics ought to give the best 
insight into the the ways firms' execute their strategies.  Rather, 
simulation of the book, together with general financial indicators can 
help separate expected changes from novel ones.  Some datasets even give 
trader identities to the resolution of firms (e.g. Goldman Sachs, not 
Joe Smith), so those signatures can potentially be pretty information 
rich.