In this article,
I am willing to explain why I wrote previous article of “Efficient Portfolio
of Assets: Application of Markov Chain”. The reasons are as follows:
1) As you can
see, the most crucial thing to apply the model of Markov Chain for the transactions
in finance is to assume the constant rate for Risk and Expected Return. In
fact, key factors are to be fixed them. But how can we secure a constant rate
for risk and expected return? It can be done by injecting the money as fuel. Let
me bring you a real example about the transactions of Crude Oil as an asset
during the period of 24 hours on May 7, 2010 as follows:
Crude
Oil Price


May
7, 2010


Hour

Minute

Second

Pr
(USD)

Ra

11

43

19

75.41


12

1

20

76.18

1.02%

12

14

32

75.23

1.25%

12

55

30

76.04

1.08%

23

40

35

75.41

0.83%

Where we
have:
Real Price
(USD) = Pr
Expected
Price (USD) = Pe
Return Rate
(%) = Ra
Expected
Return (%) = Re
Referring to
above mentioned, we have variable return rate on each exact time. If we want to
have the constant return rate (Re), the Expected Prices (Pe) will be changed as
follows:
Pr

Pe

Re

75.41


76.18

76.18

1.02%

75.23

76.96

1.02%

76.04

76

1.02%

75.41

76.815

1.02%

In fact, in
the staring of deals, the price is $75.41 and after the first transaction, the
return rate will be revealed by the price of $76.18. If we want to control and
have a constant returning rate, we should take the action as follows:
We have
formula of return rate:
Re = (Pe
76.18) / 76.18
Regarding to
above table, to fix expected return rate and to have a constant Re, we have two
states as follows:
Sometimes
Pr > Pe: Our strategy in action will be the injection and investment of the
money on others assets to fall down the real prices
Sometimes
Pr < Pe: Our strategy in action will be the injection and investment of the
money on Crude Oil asset to increase of the real prices.
Of course,
this is a game and maybe the application of the Game Theory will help us to find
the best analysis. Because we have the limited internal resource and are not be
able to purchase so many numbers of the shares to increase or decrease of the
share prices (Which asset is the better to buy? How much percentage should we
buy?).
Application
of the Game Theory after PEST, Industry and SWOT analysis will guide us to find
how much percentage of the shares and which ones should be purchased in which
the total action will be affected on Pr and Pe.
As the
result of this model, a fluctuation will be raised among the whole of the stock
markets when there is the lack of the Value Chain throughout the world in which
it can be linked the scarce resources. In this case, we have not enough money
(Energy) to handle the model of Markov Chain. As the matter of fact, it means
there is the lack of liquation on assets to reach the critical points.
This model
can be also expanded for corporate strategy where the shareholders move among the
Corporations.
2) Referring
to above mentioned (Reason 1), we are speaking about the constant rates
(numbers) such as Risk and Expected Return, the types of the states (Assets),
money, liquation and critical points.
Now, I can
remind you about my first article of “Actually, what is the problem?” that I sent
this article on https://www.xing.com/net/pri46ffacx/mathe/generalinterestremarksandlinks5223/actuallywhatistheproblem14781292/on Oct 25, 2008 (link of this blog: http://emfps.blogspot.com/2010/10/actuallywhatisproblempart1.html).
My question
was: Can we join Gibbs’s formula (F = C – P + 2) and phase diagrams in
thermodynamic to all of systems in the world?”
The answer
is yes. Because of below cited:
In above
model of Markov Chain, we have three variables of the Time, Risk and
Expected Return
 In phase
diagrams, we have three variables matched by Risk to Pressure and Expected
Return to Temperature and the time
We have the
money matched to the Energy, the types of the states for both of them, material
matched to assets, liquation and critical points for both of them.
 The most
important thing is that there are the critical points for each two systems in
which the variables will be the constant numbers (boundaries)in this critical
points.
You can see
both systems are completely matched together.
3) Referring
to Reason (2), I found an example or application for my first article after 36 months.
Three days ago, I posted the article of “The Constant
Issues, Universal Laws and Boundaries Conditions in Physics Theory” on
the link of “http://emfps.blogspot.com/2011/10/constantissuesuniversallawsand.html “and I told that I am working on a new constant natural number.
Maybe I will find an example or application during the period of the next 36 months???
4) What will be the strategy in action?
Referring to Reason (1), it can be proved that we need
to discover new resources of the energy other than the existing resources to
eliminate the fluctuation on the stock markets.
One of the ideas to discover new resources of energy
is to save the energy during the period of time accompanied by the constant conditions
(refer to above model and the constant rate). In this case, each 1 KJ of energy
saving will be just equal to 1 KJ discovered energy. What are the constant
conditions? The methods, which are applied by energy –saving, should not be
suffering the whole of the people in the world. In the other word, the people
should feel that they are convenience before and after energy –saving. This is
the constant conditions. Of course, this strategy needs that the people in the
world cooperate to abandon their wrong habits. I had already brought an example
of energy saving in article of “Saving Techniques: Optimization in Boiling Water Consumption on the link of “http://emfps.blogspot.com/2010/10/savingtechniquespart1optimization.html”
As you can
find on Recommendation
of this paper:
“What is
the Influence of energy saving by the people on environment and business in the
world?
International
Energy Outlook 2010 (IEO) stated that total world energy consumption rises by
an average annual 1.4% from 2007 to 2035. If we assume only 61% population of
these 39 countries care about energy saving on the case of boiling water, AE
can be calculated just equal to 1.4%. It proves that this method as well as
works”.
Note:
“All spreadsheets and calculation notes are available. The people, who are
interested in having my spreadsheets of this method as a template for further
practice, do not hesitate to ask me by sending an email to: soleimani_gh@hotmail.com or call
me on my cellphone: +989109250225. Please be informed these spreadsheets are
not free of charge.”