Quantum Risk Management

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Saturday I presented a paper on our research (1974-1999) at NJIT for the occasion of the retirement of my mentors. http://docs.google.com/Present?docid=dhnbrkcw_1pmtx37

While the presentation was well received, I neglected to present our - Hide quoted text - work in risk management, which has become recognized as essential in just about every application these days and in particular the important ISCRAM initiative now being spearheaded by my mentors. http://www.iscram.org/

( Fortunately it was covered in other presentations. http://is.njit.edu/events/fest07/schedule.php )

A related issue, in my job hunt, I have found that I am limited in my opportunities in financial risk management as I have only 6 months financial derivative experience. http://whitescarver.com/jim/

It occurs to me that the framework for risk is the same in any application and is directly related to dynamical quantum logic verses static classical logic.

The elements of risk management are:

1. identify potential risk (what is logically possible), 2. measure, quantify, metrics of the risk (probability), 3. monitor risk (change in indicators, e.g. ask/bid differential in liquidity risk) 4. control risk proactively (e.g. put option), 5. mitigate the occurrence of that which is risked, when it happens, such that it is detected, and countered, as is necessary, and the model corrected to reflect the resultant risks.

While this seems simple enough, it is not solvable in finite time by classical reasoning. Classical logic leads to best practices which ultimately fail because the nature of risk is that it does not reflect what is presently true, instead it represents arbitrary change in the system and its expected behavior. Static logic is inherently bad at dealing with it. Best practices constantly change.

In quantum systems, only change is manifest. In classical thinking all possible futures exist to some probability, but the is proven wrong when there is only one single quantum outcome, 100% or 0% with no side effects.

Such is the nature of systems in general as exhibited by the fact that such systems are incomplete by Godel. The notion that constructable logical systems is a subset of classical logical systems is naive. Godel's reasoning is itself incomplete by Godel. The postulate of the excluded middle stands contradicted. Not all propositions are decidable in real systems.

In classical reasoning the quantum needs to know the future to determine cause and effect. In real constructable systems there are multiple causes for an event such that events are cause-cause rather than cause-effect. Constructable systems exhibit this cause-cause nature as quantum system do. In classical thinking this is backwards causality requiring action backwards in time. In real systems, quantum systems, and constructable systems in general, synergistic cause-cause behaviors are exhibited without any actual backward in time causality. Cause and effect alone is simply an incomplete preferred perspective and the true nature of time is relative, not absolute. For example using a proven best practice, e.g. some trusted option, causes failure when that practice is no longer useful and may itself introduce risk.

Using quantum logic to mitigate risk is not new to the financial industry. The "quants" get high paying jobs. Sometimes I wish I did not hate the formality so much so that I could profit from it personally. The formalities work, but leave you pretty clueless about why or how the result is obtained. I am lexdysic and naturally think in a superposition of states. But such systems become too complex to comprehend with my small brain at the base level and I employ abstraction that conceals the primitive formality such as my embryonic Querk Calculus and G-S-Brown's Laws of Form. I would need to complete the Querk Calculus or equivalent before I could sell myself as a "quant", or even a real information physicist for that matter. I am still a wanna-be.

Evolutionary logic gets the same answers as quantum logic, as it effectively tries all possibilities, to determine the final discrete or "quantum" outcome, without regard for cause and effect, allowing symbiotic causation to flourish.

At the conference, Ben Shneiderman described the work of our mentors as Science 2.0. Rather than the linear causal relations science generally looks for, Science 2.0 is multi-dimensional, and holistic (multi-disciplinary). Such is the nature of quantum and evolutionary logic in supporting truth that is relative, not absolute, but also deterministic relatively, by relative synergistic causation, rather than cause and effect.

In my view, solving the problems facing humanity will require collaborative causality in the network nation. This implies Science 2.0 replacement of the classical notion of absolute truth and time, to minimize our risk of failure, by maximizing our probability of success, employing complete constructable (finite) quantum (or evolutionary) logic.

JimScarver

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