Friday, December 15, 2017

Testing the barrier

Stocks, Yields, Dollar Surge On News Rubio Is "Yes" On Tax Bill


The senate has agreed to support higher interest charges.  

Interest charges were already growing by 10% a year prior.  This puts us into the shutdown territory, when congress pays 3% of real GDP in interest charges.   Next comes the budget and senators will be protecting their small discretionaries in the face of highly volatile, and rising interest charges.

The one to ten slope has been less than 70 basis points for days, it will have to stay that low else the ten year yield fails to hold below 2.5. The long term chart  on that tells me we don't see 2.5 until  regime change.

Curve slope is time independent

The insurance component of tem banking sets the time indices, and stretches out loans a bit.  In brigade theory the there are no term points, instead we have the finite, and small, set of -iLog(i), where i is the share of some hypothetical market channel, two color.  The variations of -iLog(i) should be gaussian distributed, according the Shannon theory, I think.

Not for us, since the two sided trade sets the shares i. And the variation in the derived set of i will be proportional to the amount if inside information absorbed.   After seasonal adjustment, that is closer to 1.5 points.  This is price variation, not bit error.  

Pricing is the result of discovery, that means we are intentionally sloppy, not up to Shannon standards, we waste a bit of transaction space on discovery.  Our model has to create both signal and noise, in the Shannon model, it is not a given.  We complete  the model by passing the map, and that takes up space.  The map, in this case, is the tradebook with some fixed uncertainty.  That is, menu costs are real, and computed in the economy, for real, as a trade exchange, a two sequence mapping problem.  


The lost transaction space is taken by the market maker, the pit boss.  Shannon wants the pit boss error to be nicely rounded, but it comes out chaotic. Chaotic mainly because agents will adjust window sizes, the sequence to completion.  We never actually get a complete message to encode, in the Shannon sense.  So we will always have requantization.


At the pits


We get adjustable, asynchronous  interest charges.  These charges are meant to create the exact Shannon match, as if interest flows were constant, as if the sequences were mostly repeatable.  These interest flows set pricing, the pit boss accumulates a chaotic residual, and trading bots get charged an implicit (or explicit)  menu fee to cover the lost transaction space.  Shannon is the equilibrium for repeatable sequences, all inside information has been gleaned, the banker knows the sequence to completion. Shannon proved it in the limit as sequences get longer. Brigade theory is an adaptable Huffman encoder and does not have a complete calculus, but does pricing ration fine and dandy.

The elliptical algebra of multi colored pots

The two color pot is about finding spectral points to fill in discover an elliptic curve in planar space.  The pti tries to approximate the crypto problem, finding a curve that fits discrete points and obey a useful algebra.  

The three color is about find the ellipsoid that covers the set of discrete points from three sequences.  It is easy to visualize, think of the grocery check out in which the tax agent has to make regular visits at each transaction.  The pit boss is filling i the local transaction space by finding the typical sequences of three generators which evenly fill a finite number of transactions over the window.

The integer solutions are likely something like a Markov tree, but we can't get that except that the pit boss is willing to take some round off error.  But the markov tree likely solves an interleaving problem in three space.  


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