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Les ClewlowThis book is best digested in small morsels as the content is very rich and varied. It is not a book on the implementation of non-linear methods, as the title might imply. It is a personal view on how relatively new techniques such as chaos, fractals, genetic algorithms, and fuzzy logic, and their connections to modern finance can be understood.
The author, who has many years trading experience, proposes the total replacement of the classical approaches with these new non-linear methods. Maybe he took this iconoclastic approach because of his perception of how deep-rooted the resistance is to the introductions of these new techniques. Perhaps, deep down, he believes just as much that progress lies with the refinement of the classical methodologies.
In either case, the book is targeted at the non-technical reader and many of the qualitative explanations of technical concepts -- one might argue -- are misleading. In defence of the author I suggest that the primary aim of the book is to communicate the potential significance of the concepts to a very general audience. The scope of the book is enormous. Chapter one sets the scene and style -- sketching the problems that the author sees with the standard approaches and indicating where he feels the solutions lie. Chapter two looks at the historical development the linear and non-linear approaches. By the time we reach chapter three we begin to have our imagination stretched with examples drawn from many disciplines -- astrophysics, music, evolution and quantum physics. Fractal analysis and the Hurst exponent are discussed in the next two chapters in particular with reference to the KAOS screen on Bloomberg that the author helped to develop. In the remaining chapters, we are made to work hard, as we are taken on a fascinating exploration of many other new tools and techniques. Genetic algorithms and fuzzy logic are dealt with in some detail, as are the relationships between models and reality. Insights are drawn from physics, biology and computation.
In summary, if you approach this book with an open mind, it is worth the effort. There are hidden gems for everyone her
—School of Finance and Economics, University of Technology, Sydney Financial Options Research Centre, Warwick Business School Lacima Consultants Ltd.