## 水曜日, 9月 28, 2016

### Compatibility of Concentration in Core Competence and portfolio.

Financial engineering can be applied to everything.
It indicates that you can describe every decision making in life by mathematics.
The concept of the portfolio in financial engineering is particularly interesting. If the risk and return is quantification & Digitizing, it can be convertible to combinatorial optimization problem.
Theory of portfolio indicates the importance of having multiple choices. Whatever, It is always increase the ROI when you choice diversified investment than focus on one. It is described mathematically.
If there is an infinite resource, this concept is correct.
On the other hand,
everyone also be emphasizing the importance of selection and concentration.
The background is a problem of resource distribution.
In addition, every phenomenon is also relevant to behave exponentially. This and that the time evolution of this world is described by differential equations, And from the fact that the solution has been met by an exponential function.
If the resource is finite and output behave exponentially, it is nonsense to blindly increase the choices.
Selection and concentration, it is important to balance of diversified investment (portfolio). So this is an optimization problem.
Parameter is a resource.
The resources referred in this article, refers to all of the parameters thatthe additive has a meaning.
• Money
• human resources and man-hours,
• The phenomenon that can be handling in terms of monetary value
• energy
If there is a meaning to the SUM () in Excel, it is possible to treat as a resource. If all the parameters of the world by making full use of mathematical techniques such as coordinate transformation and mapping
In most cases, it is possible to handle as a resource.
Well, if the resource is less should not blindly increase the choice of diversified investment. All it will be half-hearted.
If the resource is sufficient, diversified investment is enabled.
According to the portfolio theory
We recommend that you combine those with no correlation to risk.
Resources, return, risk, correlation of risk,
These are always need to quantify.
If there is something unclear in one of these, decision-making will be the intuition rely.
Quantification of risk is very difficult. Feasibility study will often qualitative description. In particular, if there is an abstract things, It will be difficult to quantify. Analysis of risk requires specific model always.
Knowledge of this when mathematics and physics will be required.
Tool is the Monte Carlo method.
It can be used in all risk analysis.
Knowledge of mathematics and physics and financial engineering will help all decision-making in life. This includes work.