Before Black-Scholes

[TradingPilot]

How the heck did you guys trade before the Black-Scholes model??

 

[itmediaco]

Qualitative heuristics

 

[Bernoulli]

Ed Thorp had a pricing model that anticipated Black-Scholes, which he used to price warrants to great effect. That was in the mid-Sixties and there was a lot of mispricing. There were no exchange traded options until 1973, interestingly when the Black-Scholes paper was published.

 

[Kevin Schmit]

Quote from TradingPilot:

How the heck did you guys trade before the Black-Scholes model??

Samuelson, Paul
Rational Theory of Warrant Pricing
Industrial Management Review
1965

Among others. Nornal approximation models all.

 

[demoship]

If I were him I would've kept that model a secret, and just traded mispriced options. Make a lot more that way.