1. Algorithmic Derivative Trading

2. Types for CNFs Type of a clause: –Pair: (length, positive literals) –Example: (2,2) for (a or b) Type of a cnf: –Set union of types of clauses –Example: T = ((2,2) (1,0)) for (a or b) and (b or c) and !a and !b and !c

3. CNF type as derivative Determine price p in [0,1] for derivative T, e.g., price for ((2,2) (1,0)). When I buy your derivative T at a price p you have the obligation to give me a cnf of type T and the fraction of the clauses that I can satisfy you have to pay me. What is your price for derivative T?

4. Fact There is a unique price p(T) for derivative T: –p > p(T) you make money –p <p(T) you lose money –Assumes that I have only polynomial time available, e.g., quadratic polynomial time.