Nonlinearity modeling
While linear relationships aim to explain observed phenomena in the simplest way possible, many complex physical phenomena cannot be explained using such models. A nonlinear relationship is defined as follows:
![](https://static.packt-cdn.com/products/9781784394516/graphics/B03898_03_01.jpg)
Even though nonlinear relationships may be complex, to fully understand and model them we will take a look at the examples that are applied in the context of finance and in time series models.