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Systematic and Automated Option Trading (Collection) by Sergey Izraylevich, Ph.D., Vadim Tsudikman

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chapter 8. The Impact of Criteria Correlation on Multicriteria Selection

8.1 Introduction

The majority of criteria are to some extent correlated. The reason is that while inventing various valuating techniques based on different principles and approaches, we always strive for one general goal: to reveal situations when our estimate of underlying asset prices variability does not correspond to market values of their options. Approaching this problem from different aspects and using various mathematical constructions, we aim to invent various indicators reflecting (either directly or indirectly) the profitability of future trading. Therefore, the existence of an interrelationship between different criteria is quite natural and follows from their ...

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