GOIH Quantitative Financial Group--Statistical Robustness of the Normal Distribution.

Quantitative Finance Group:

Our QFG has developed an algorithm to determine the statistical robustness of the Normal Distribution in dynamic asset pricing under extreme economic conditions. Extreme economic conditions such as the crisis in the credit markets and other economic disasters.

What this means is for the pricing process of exotic financial instruments, i.e., subprime mortgage derivatives, credit card receivable derivatives, etc., what is the equivalent distribution function for exotic financial instruments as to what the Hurricane Roof would be for residential construction in South Florida?

Our QFG believes that the Normal Distribution, N(µ, σ) is flawed for the pricing of exotic derivatives under disaster conditions. We believe the distribution should include a behavioral finance component to compensate for the “fat tail” risk probability.

Practically this means how can GOIH and its investment banking arm take advantage of a fundamental flaw in the pricing of financial instruments and create an arbitrage condition for profit.

We will publish more on this topic.