## The Physics of Financial Exchanges.

**If you want to find the secrets of the universe, think in terms of energy, frequency and vibration. — Nikola Tesla. **

##### The SP500 as a Parabolic Distributed Wave Function.

**Financial Markets are Telecommunications Signals.**

• **Prices are just numbers in databases connected to each other by telecommunications networks that operate at the speed of light.**

**• Money is nothing more than information transmitted by electromagnetic energy.**

** • Light and money are therefore the same thing and will obey the same laws of physics.**

**• How you know something is money because you can see it.**

**• The vector that transmits the relevant information to your brain is light.**

**• What we are looking at in markets is exactly what a telephone conversation looks like on an oscilloscope at much higher frequencies.**

**• What we are seeing is essentially the sound of a crowd that changing in amplitude over time modulated by a low frequency carrier wave.**

**• This wave is a triangular ramp type with a long rise and short decay time and is the one we are interested in.**

**• To discover the equation of this wave we must first remove the high frequencies to discover the current position of the long term trend.**

**• To do this a band pass filter is used to remove the high frequencies while passing the low frequency. **

**Where**: **f(t) – e^jsdt + c = 0**

**f(t) is the market.****j is the complex directional component.****s is the exponential step constant.****dt is the number of periods since the last reversal of the market contour**.**c is the initial price of the data sample.**

**Application**.

**This method allows you to calculate a markets volatility and track the direction of its first, second and third derivatives instantaneously in real time when pricing risk in derivatives contracts****.**

** The last time I saw the market this badly mispriced was at this time of year in 1987 ****and here we are again three decades later leveraged out to the twilight zone in a market that has lost all concept of rational price discovery and that always ends badly. **

**The objective of any sound portfolio and risk management method is to protect your book from unwanted fluctuations to stabilize long term returns and most of importantly of all protect capital. **

**The conventional wisdom would have you believe there is no pure solution to this problem because there is no relationship between the mathematics of physics and that of finance. **

**This is simply not the case they are related to each other by the Laplace transform using different variable names for the moving parts. **

**Intuition would lead you believe that the Fourier transform would be a good place to start however its draw back is that it does not tell your what you need to know what it does is convert from the time/price domains to the frequency/phase domains which gets you nowhere, the market may be cyclic but it is not periodic it is an interference pattern. **

**The Laplace transform can be configured to convert from the time/price domains to the time/log returns domains using the same mathematical principle that is used in the design of mass dampers installed to protect bridges and buildings from earthquakes, i****t just has to be re designed for use in financial markets as a portfolio stabilization tool.**

**Summary**.

**Summary**.

**Prices are just numbers in databases connected to each other by telecommunications networks.**

**Money is information transmitted at the speed of light by electromagnetic energy.****Light and money are therefore the same thing and obey the same laws of physics.**

**Electromagnetic energy travels in the form of waves.****The market wave is a triangular ramp type with a long rise and a short decay time also known as the boom and bust cycle.****To discover the properties of this wave you must first remove the high frequency component.****A band pass filter will do this and remove the high frequencies and let the low ones pass through.****This filter is based on the Laplace transform of the market.**

**SP500 Field Equation 2014 – 2018.**

**SP500 Daily Laplace Solution 2016 – 2021.**

#### SP500 Weekly Laplace Solution 1998 – 2021.

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