chiral3
|
| Founding Member |
| Total Posts: 5122 |
| Joined: Mar 2004 |
| |
|
| She was a blond, US educated woman; possibly with an undergraduate degree in communications. She wasn't alarmed by him mumbling "I am become death, destroyer of worlds", but the differential equation was too much. |
Nonius is Satoshi Nakamoto. 物の哀れ |
|
|
 |
Nonius
|
| Founding MemberNonius Unbound |
| Total Posts: 12790 |
| Joined: Mar 2004 |
| |
| |
 |
|
> I hope you're not confusing risk-neutral pricing and perfect replication!
>Yes, I do confuse them.
Apparently, you're not the only one, as witness recent affirmations I picked in a prominent article.
Risk-neutral pricing ensures the absence of arbitrage opportunities between prices of contingent claims.
This has nothing to do with perfect (or imperfect) replication, because there is obviously absence of arbitrage when pricing derivatives in incomplete markets. |
BSM is not a model and, because it is not a model, no model can surpass it. |
|
|
|
LongTheta
|
| The Snowman |
| Total Posts: 3150 |
| Joined: Mar 2004 |
| |
|
numbersix,
Earlier this year, I was walking up rue Lacepede on my way to a Lebanese joint off Place de la Contrescarpe when I found myself in front of ITO33 headquarters. I remembered that, many years ago, you asked me to drop by when I'm in the neighborhood, so I knocked and asked for numbersix but was told that you were in London for the day. I will try again next time I'm in Paris.
By the way, in that Lebanese place, which on the short part of rue Mouff to the right as you go up towards Contrescarpe with your back to Lapecede, they not only make great falafel, but they are also kind enough to make me food when I go there way past midnight. |
Time is on my side. |
|
|
|
I am back.
Falafel is on my side. |
BSM is not a model and, because it is not a model, no model can surpass it. |
|
|
|
LongTheta
|
| The Snowman |
| Total Posts: 3150 |
| Joined: Mar 2004 |
| |
|
| You know this place? with your back to Lapacede, you cross Contrescarpe, turn right towards Descartes, and it's on the left, past the Vietnamese place. |
Time is on my side. |
|
|
|
| Somebody here might find this entertaining. (Two deductions of price from the concept of pre-quantitative volatility.) |
BSM is not a model and, because it is not a model, no model can surpass it. |
|
|
|
deeds
|
|
| Total Posts: 462 |
| Joined: Dec 2008 |
| |
|
@numbersix - not sure whether you'll get a little signal from this blackhole...if so -
thought about you last night listening to Bruno Dupire recap some examples of arbitrage available in complete markets through the effect of reparameterization/calibration of models used by 'most' market participants in a variety of markets...i think he has spoken and written about this before (maybe as far back as 97?)
resonated heavily (in my tiny mind) with your themes (though seemed to be more practical and detailed)...in this case the message wasn't that everyone is conceptualizing model risk from calibration incorrectly, it was that, as a byproduct of practical fact of market consensus on model, reparameterizing leaves convexity on the table |
|
|
|
willis
|
|
| Total Posts: 24 |
| Joined: Feb 2005 |
| |
|
| Deeds, do you recall any examples Dupire was mentioning? |
|
|
|
|
deeds
|
|
| Total Posts: 462 |
| Joined: Dec 2008 |
| |
|
trying to get slides...will revert if possible
I think it's an old topic for him, (he referenced a 97 paper) but he was adding examples |
|
|
|
deeds
|
|
| Total Posts: 462 |
| Joined: Dec 2008 |
| |
| |
|
