A New Landscape Through Topographic Finance by Paul Cottrell

 

What is topographic finance?  Topographic finance is the study of financial and economic systems in multiple dimensions, whereby three–dimensional and four–dimensional graphic technologies are used.  This new financial analysis methodology provides insight that lower dimensional visualization cannot capture.  Topographic finance can be used for trading and financial analysis.  In figure 16 a lower dimensional visual representation is presented. 

A typical financial chart has price and time.  In addition to price and time, the volume of trades at a particular time frame can be represented.  As you can see there is very little understanding in this example about volatility.  Many traders use multiple indicators on their price chart, but the ease of reading these charts can be difficult at times, especially in fast moving conditions.  There must be a better way to represent market movements in a higher dimensional way.  The solution to this representational problem is the use of topographic finance.

Many option traders use volatility surfaces to understand the non–linear dynamics to the option they are trading.  An option’s volatility surface contains volatility, time to expiration, and strike price.  A volatility surface shows time decay of an option.  There must be a way to utilize the concept of the option’s volatility surface for non–option financial products.   Of course there is a solution to this problem via the utilization of topographic finance.   

One can use a three–dimensional graph to see the topology of the three variables of interest.  Usually this is done using the following: time, log return, and volatility.  But other three–dimensional configurations can be constructed, e.g. time, correlation to another asset, and the 200-day moving average of price.  It is quite easy to envision the vast amounts of different variable configurations that an economist or financial analyst can make to get a better understanding of the complexity of the non–linear dynamics of the financial markets.