Thursday, May 04, 2006

Continuing theory on Dynamic pricing of contracts and securities


This is an illustration of gravity, which could serve as a close analogy to market impact of news and fundamentals.

If one news item is dominant in the current market or relating to the contract or security the visualization of effect would look something like the above.

If more than one existed depending on the weight of the item other pulls on the price would exist. Timing of the release and effect on the market might be shown as follows:




You could draw a line which would indicate anything to the right of it would attract sellers anything to the left buyers, or graphically it could be plotted on a chart. Impacts weight and duration, expectancy, and other impacts come into play.