Mathematics of finance – 1: Finance Trading Times

Mathematics of finance – 1

In a city like Hyderabad, Delhi or Mumbai, how many deaths occur daily due to road accidents? 1, 5, 10 or 25? The number varies. But yes, it happens daily. Do we notice it or we take it for granted? I tend to take it for granted if I see a news item mentioning “2 people died in a road accident”.

On highways in India, how many deaths occur daily due to road accidents? Just to make an estimate, a bus can carry 50 passengers and if on an average 2 such buses meet road accidents everyday across the country, then there is a loss of 100 people. Again, on an average, it happens daily. Do we notice it or we take it for granted?

Then, how many deaths occur if a volcano erupts in a country like Japan? Chances are that volcanic eruption can be predicted. Hence the number of casualties can be controlled. But still, the no. of casualties is much larger than what we see in overall highway accidents. But do we see volcanic eruptions daily? No. Probably once in a few years, that too in a volcanic area and that too can be predicted. Do we notice it or we take it for granted? Atleast I would read the news item atleast once.

Now, come to something larger – Tsunami comes only once is a thousand years, may be even after a longer time. The effect A Tsunami has sufficient power to hit multiple countries, affecting right from Indonesia to Andaman, to Indian Peninsula and on the way to the borders of Pakistan and Afganistan.
Loss of life in a Tsunami: Devastating.

How about Hurricanes, like hurricane Catrina or hurricane Rita which hit the US coast line in last years? Hundreds of thousands of people had to be relocated.

Why am I telling all these things? :- )

Well, I want to convey the simple message: What appears to be less probable, has a more devastating affect and interestingly, it comes without any notice or prediction.

Tsunami may come once in thousand years – but when it comes, it has the power to erode out the entire region and take lives numbering in millions. Everyone notices this news item.

Road accidents happen every now and then – one or two people die, hardly anyone notice it. Even if they do, they take it for granted.

When the news of Tsunami came, “Tsunami” became the most searched word on internet. Newspaper, TV, media everyone started to talk and educate people about tsunami.

Does the same level of coverage happen for road accidents? I don’t think so.

Continue to Part II
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