lol it's not recursive. Stochastic-models are recursive so bitch about those. You can't use IV to calc price. Price outputs IV.
Use Monte Carlo, Bro.
I told you BS was BS!
- Thread starter wxytrader
- Start date
lol it's not recursive. Stochastic-models are recursive so bitch about those. You can't use IV to calc price. Price outputs IV.
Use Monte Carlo, Bro.
And needing the call price to calculate the put price thing. They are completely separate entity's...all this parity garbage is to compensate for the fact that the two are connected via a workaround.
dumbass, it's been answered. The difference between a put and a call is shares. You don't want to have to compute the put independently via the vol-figure when the conversion is best practice. Vol outputs the call price and the conversion perfects the put.
Cuck, it's not a work-around. It's fucking brilliant.
I was going to invite you to the room but forget it.
D's room????
Black-Scholes Assumptions
The Black-Scholes model makes certain assumptions:
- No dividends are paid out during the life of the option.
- Markets are random (i.e., market movements cannot be predicted).
The whole system is flawed because of this assumption. The market is anything but random. None of it takes into account the most important factor which is trend reversals. Calls should be more expensive at the beginning of a trend, and cheaper as you get closer to the end. You can use the rsi whatever but price needs to be adjusted via calls getting cheaper and puts getting more expensive before the reversal not after if you really want an efficient market.
WOW.just WOW
Dude,you HAVE to exert some self control...
Dude,you HAVE to exert some self control...
D's room????
Black-Scholes Assumptions
The Black-Scholes model makes certain assumptions:
- No dividends are paid out during the life of the option.
- Markets are random (i.e., market movements cannot be predicted).
The whole system is flawed because of this assumption. The market is anything but random. None of it takes into account the most important factor which is trend reversals. Calls should be more expensive at the beginning of a trend, and cheaper as you get closer to the end. You can use the rsi whatever but price needs to be adjusted via calls getting cheaper and puts getting more expensive before the reversal not after if you really want an efficient market.
Why would you do that? He's an endless source of amusement
Alright, I am very glad we are back on a serious discourse here, we slightly got off track there a moment.
I think we are definitely in agreement on your second paragraph about what a model "is".
It's defending BS that becomes baffling to me, not just you btw, you are probably the majority, which is so weird to me. Let me make my point using the formula for Force as an example of a "good" model and contrast those characteristics to BS which implies it is a "bad" model.
F = G*(M_1*M_2/r^2)
Here G is the gravitational constant. Now if it turned out, that every time the Force between 2 objects changed, that the gravitational constant changed, Galileo would have been laughed out of the room and we wouldn't know who he is. The model would not work as it should and we just would have no reason to use it.
This is exactly the case with BS. The volatility is supposed to be constant, but every time you change the price, the volatility also changes. It just simply does not reflect accurately what is happening in the price series as it is observed, plain and simple. One of the reasons for the shortcoming in the model, is that the original formula it is derived from (Boness) does not make an assumption on the underlying returns. The underlying return parameter is meant to be estimated from the data. While BS is indeed an elegant and beautiful piece of math, the assumption under the math regarding the underlying returns is so incorrect that it actually destroys itself.
The Force formula was able to explain many phenomena that we earlier could not understand. Like why you might weigh less at higher altitudes, or why large bodies in space orbit each other. It was a huge leap forward in understanding things that we could observe but not understand or things that we couldn't have observed then, but later discovered were correctly implied by Galileos formula.
This is precisely the opposite of BS, which requires you to abandon what we observe, to accept it. And the more we learn, the more it becomes irrelevant to observation.
Regarding models not needing to be perfect. So what Galileo got "wrong" in his formula, was what Einstein eventually turned into relativity. The idea, that a falling object doesn't actually "know" it's falling. The Force formula doesn't explain what gravity is, or the curvature of space, or a whole tons of other things, it just knows it's there and accurately assumed it's effect. And truthfully, it doesn't need to to do all that. It's just doing the one thing and to this day, no matter how much we learn about the universe, it keeps doing that one thing just as well as it did back then.
I would agree with the implication of one of your earlier statements that this doesn't require more than high school education to understand or explain. It's very simple. Now if you are just saying, BS is good because I can use it in business and make money, then I'm not even trying to touch that argument because that's not what I'm talking about. And I would never try to tell someone to stop making money. But just because that is true, does not in any way mean that BS is a scientifically "good" model.
We're all busy people, so feel free to take your time, but please explain to me where my thinking is flawed. I am truly open minded.
let him/her speak! truly open minded.
there are tons of super smarties who also think BS is trash too btw. So, you know.