I told you BS was BS!

[smacdtrader]

Do you even understand what a model is and why do we need it? Cause I've heard better arguments from high school students.

so what is the defense man, for real, put up some evidence for BS being a good model. break it down for my feeble mind.

 

[ironchef]

ok. play me head to head starting monday for 30 days. you're the big time. i'm just a lowly folder. put me in my place big dog.

it'll be fun.

so what is the defense man, for real, put up some evidence for BS being a good model. break it down for my feeble mind.

It is a good friendly debate. We are taking lessons from from both sides.

No need to turn it into a duel?

 

[Slow Learning Elf]

so what is the defense man, for real, put up some evidence for BS being a good model. break it down for my feeble mind.

I already did and you pointedly ignored me, so I feel like I am wasting precious bytes. But I'll humor you since I am waiting for something to finish calculating.

In general, a good model does not need to perfectly reflect reality. Instead, it is a conceptual representation that is based on a set of assumptions that can be explicitly and easily understood. The level of detail is chosen for a specific purpose, balancing fidelity against tractability. Look at other disciplines for examples of scientific models. C. elegans (aka nematode worm) has 302 neurons and yet it is a good model for how our central nervous system functions. Is it a perfect representation? By no means, but it's easy to work with and easy to understand. There are numerous examples like this, from Schwarzschild radius to Navier-Stokes PDE.

Black Scholes is a good model because it's based on an intelligent set of assumptions and is so simple. That makes it tractable, easy to fit and understand the perturbations. The models like SLV are much more complicated to fit, have free variables that required historical estimation and still don't reflect the real life dynamics.

 

[themickey]

I already did and you pointedly ignored me, so I feel like I am wasting precious bytes. But I'll humor you since I am waiting for something to finish calculating.
In general, a good model does not need to perfectly reflect reality. Instead, it is a conceptual representation that is based on a set of assumptions that can be explicitly and easily understood. The level of detail is chosen for a specific purpose, balancing fidelity against tractability. Look at other disciplines for examples of scientific models. C. elegans (aka nematode worm) has 302 neurons and yet it is a good model for how our central nervous system functions. Is it a perfect representation? By no means, but it's easy to work with and easy to understand. There are numerous examples like this, from Schwarzschild radius to Navier-Stokes PDE.
Black Scholes is a good model because it's based on an intelligent set of assumptions and is so simple. That makes it tractable, easy to fit and understand the perturbations. The models like SLV are much more complicated to fit, have free variables that required historical estimation and still don't reflect the real life dynamics.

That's quite a lot of big words for a slow learning elf!

 

[Kevin Schmit]

This opens up a question about awards, though those particular are pretty bullet proof. I'd be curious to know how long they stay?

FYI, there is an International Math Olympiad Silver Medalist posting in this thread. Also Putnam. He's still in finance, 30 years post, not academia.

Hint: he's not on your side of the argument.

Stop posting on this topic, quit while you're only this far behind.


Edit: removed years of awards to avoid doxxing

 

[taowave]

Dude, play with your own head.

I'll be the first to admit,I don't put up 8 percent on my best day.

Not everyone has your hubris and imagination

ok. play me head to head starting monday for 30 days. you're the big time. i'm just a lowly folder. put me in my place big dog.

it'll be fun.

 

[SunTrader]

I'm implying that if you start trading with $3M you end up with $1M. Sometimes sarcasm doesn't translate clearly online.

Long, long ago it was said, something to the effect, if you want to make a million dollars on Wall Street start with two million.

The numbers get bigger, its applied to more than Wall Street, but yes some of us have heard it a time or two or a hundred times before.

 

[taowave]

So selling puts is risk free by your definition.Goes up you collect premium,goes down "you are actually getting paid to be wrong".

Never looked at short downside gamma that way

Also, I just wanted to point out that when you're selling puts you're actually getting paid to be wrong.

 

[newwurldmn]

Even I, clueless about the Greeks, know what Warren Buffett also knows:-

In his 2008 letter to the shareholders of Berkshire Hathaway, Warren Buffett wrote: "I believe the Black–Scholes formula, even though it is the standard for establishing the dollar liability for options, produces strange results when the long-term variety are being valued... The Black–Scholes formula has approached the status of holy writ in finance ... If the formula is applied to extended time periods, however, it can produce absurd results. In fairness, Black and Scholes almost certainly understood this point well. But their devoted followers may be ignoring whatever caveats the two men attached when they first unveiled the formula."[41]

If only LTCM knew.

he said that to justify his long term options trade which had some very unique situations.

the same long term options trade that cost him is AAA rating just as he was trying to buy the train company.

 

[newwurldmn]

FYI, there is an International Math Olympiad Silver Medalist posting in this thread. Also Putnam. He's still in finance, 30 years post, not academia.

Hint: he's not on your side of the argument.

Stop posting on this topic, quit while you're only this far behind.


Edit: removed years of awards to avoid doxxing

wxyztrader and simplemelike.