• Non-linearity is a mathematical term that describes a situation where the relationship between the independent variable and the dependent variable cannot be predicted along a straight line.

  • Certain classes of investments, such as options, exhibit a high degree of non-linearity, which can make these investments more chaotic.
  • Investors in asset classes that exhibit a high level of non-linearity often use sophisticated modeling techniques to estimate the amount of potential loss or gain that their investment could incur over time.