Definition of Nonlinearity:
Property of chaotic systems, characterized by approximation, random behavior, and unpredictability. It is the feature of natural (real world) or other systems which cannot be decomposed into parts and reassembled into the same thing, and do not change in proportion to a change in an input.
Situation where the relationship between variables is not simply static or directly proportional to the input, but instead is dynamic and variable. In a factory, for example, the per unit cost may decrease instead of staying constant as the output level rises (due to economies of scale), and may start to rise after the optimum output level is reached (due to diseconomies of scale).
While a linear relationship creates a straight line when plotted on a graph, a nonlinear relationship does not create a straight line but instead creates a curve. Some investments, such as options, exhibit high levels of nonlinearity and require investors to pay special attention to the numerous variables that could impact their return on investment (ROI).
Nonlinearity is a term used in statistics to describe a situation where there is not a straight-line or direct relationship between an independent variable and a dependent variable. In a nonlinear relationship, the output does not change in direct proportion to a change in any of the inputs.
How to use Nonlinearity in a sentence?
- Investors of asset classes that exhibit a high level of nonlinearity will often use sophisticated modeling techniques to estimate the amount of potential loss or gain their investment might incur over a specified time.
- Nonlinearity is a mathematical term describing a situation where the relationship between an independent variable and a dependent variable is indirect and unpredictable.
- Certain investment classes, such as options, show a high degree of nonlinearity, which may make these investments seem more chaotic.
Meaning of Nonlinearity & Nonlinearity Definition