In mathematics, one of several ways of arranging or picking a set of items. The number of permutations possible for arranging a given a set of n numbers is equal to n factorial (n!). So, a set of three numbers can be arranged as: 3x2x1 = 6 permutations. Another type of permutation involves choosing a set of i items out of n choices. In this case, the number of permutations for choosing i items given n choices is given by n!/[(n-i)!]. Permutations are applicable to sets where the order matters; order does not matter in combinations.

The study of permutations applies to finance in a broad sense because a good understanding of probability is sometimes necessary to make rational financial choices. The Allais paradox problem shows that on their own, people do not instinctually choose the higher expected financial reward. Given the choice between a sure amount of money and a small gamble with a higher expected value, most people choose the guaranteed amount due to behavioral biases. Financial professionals must be able to rationally evaluate such situations and make the correct choices on behalf of shareholders or clients.

Investment dictionary. . 2012.

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  • permutation — [ pɛrmytasjɔ̃ ] n. f. • 1474; « échange, troc » 1261; permutacion « changement de résidence » v. 1180; lat. permutatio 1 ♦ Échange d un emploi, d un poste contre un autre. Permutation de deux officiers, de deux fonctionnaires (⇒ permutant) . Par… …   Encyclopédie Universelle

  • Permutation — Permutation, die Bildung aller Anordnungen, in die eine Anzahl n von Elementen gebracht werden kann. Beispiel: a, b, c liefert sechs Permutationen: a b c, a c b, b a c, b c a, c a b, c b a. Eine Permutation heißt wohlgeordnet, wenn sie die… …   Lexikon der gesamten Technik

  • Permutation — Per mu*ta tion, n. [L. permutatio: cf. F. permutation. See {Permute}.] 1. The act of permuting; exchange of the thing for another; mutual transference; interchange. [1913 Webster] The violent convulsions and permutations that have been made in… …   The Collaborative International Dictionary of English

  • permutation — Permutation. subst. f. v. Eschange. Il ne se dit guere qu en parlant de l eschange d un Benefice contre un autre. Permutation de benefice …   Dictionnaire de l'Académie française

  • permutation — permutation. См. пермутация. (Источник: «Англо русский толковый словарь генетических терминов». Арефьев В.А., Лисовенко Л.А., Москва: Изд во ВНИРО, 1995 г.) …   Молекулярная биология и генетика. Толковый словарь.

  • Permutation — (lat.), Vertauschung, Versetzung; in der Mathematik versteht man unter P. erstens jede Veränderung der Reihenfolge einer bestimmten Anzahl gegebener Dinge (Elemente), also die Tätigkeit (Operation), bei der jedes der gegebenen Elemente durch… …   Meyers Großes Konversations-Lexikon

  • Permutation — Permutatiōn (lat.), Vertauschung, Versetzung; in der Mathematik Veränderung der Reihenfolge einer bestimmten Anzahl gegebener Elemente. (S. Kombination.) …   Kleines Konversations-Lexikon

  • Permutation — Permutation, lat. deutsch, Vertauschung, Versetzung; in der Algebra die Umstellung gegebener Größen …   Herders Conversations-Lexikon

  • permutation — index exchange, mutuality Burton s Legal Thesaurus. William C. Burton. 2006 …   Law dictionary

  • permutation — mid 14c., from O.Fr. permutacion (14c.), from L. permutationem (nom. permutatio), from permutatus, pp. of permutare change thoroughly, exchange, from per thoroughly + mutare to change (see MUTABLE (Cf. mutable)) …   Etymology dictionary

  • permutation — mutation, *change, vicissitude, alternation Analogous words: moving or move, shifting or shift, removing or remove (see MOVE): transformation, conversion, metamorphosis (see under TRANSFORM) …   New Dictionary of Synonyms

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