The FairPut Initiative

traider said:
I warned that this will happen when you go announcing to the world about what you found. I already see the opportunities slowly closing. You should have kept quiet and traded the alpha out of this.
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Are you serious or just joking? :)
I don't know how I could profit from it. I mean I never had thought about it. And right now can't imagine how it would be working. Maybe @newwurldmn can give us some hints... :-)
 
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Only $28 Mil? Why do so many penny fvcking pikers show up here?
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newwurldmn said:
i found the criminal conspiracy in the black-scholes equation this weekend while my kids were playing outside. i have already used it to earn 28MM.

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thecoder said:
Are you serious or just joking? :)
I don't know how I could profit from it. I mean I never had thought about it. And right now can't imagine how it would be working. Maybe @newwurldmn can give us some hints... :)
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I'm serious, next time you find something good don't announce it to the whole world till you have milked it dry.
 
traider said:
I'm serious, next time you find something good don't announce it to the whole world till you have milked it dry.
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Unfortunately I've no clue and no fantasy on how to do that in this specific case :-(
I think one needs much cash, ie. maybe via the r and/or q parameters... Dunno.
 
thecoder is facing violations of revealing secrets that should not be. I think the black cloaks will get him before he releases FairSpread and FairVol.
 
thecoder said:
Are you serious or just joking? :)
I don't know how I could profit from it. I mean I never had thought about it. And right now can't imagine how it would be working. Maybe @newwurldmn can give us some hints... :)
More...

Yer asking someone who is trading your new options model, which has not been implemented, on how to trade the option model you have created? This is comedy silver. (Comedy gold is reserved for the real funny stuff.)
 
Key reasons why it's so difficult to establish this new option pricing model dubbed FairPut Option Pricing Method (FPM):
  • The Put/Call Parity is (necessarily) different from the BSM one. This has big impact and implications on all the rest of maths and applications related to/with these financial instruments. Still researching...
    See also https://en.wikipedia.org/wiki/Put–call_parity
  • Put payoff at expiration can be calculated only by computer, no more mental with this fair Put payoff method (ie. FairPut).
  • Maybe also the Greeks (Delta, Vega etc.) are different [not researched/tested yet]
As can be seen, it's a huge work...
 
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Damn dividends:

Does anybody know and can help? :

Let's say volatility is 0 and dividend is 5% for spot=strike=100, t=1, r=0.

Should the Put premium be this:
100 * (e(0.05) - 1) = 5.127

or rather this:
100 * (1 - e(-0.05)) = 4.877

?

Ie. a discounting problem.
BSM says it should be 4.877, but I'm not that sure, I rather tend to think it should be 5.127.
Who is right?
 
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I even can't verify the correctness of the Put/Call parity for BSM:
Code: 
The well known Put/Call parity is
  C - P = S - K * e(-r * t) - D * e(-r * t)
where
  C is Call value
  P is Put value
  S is spot
  K is strike
  D is dividend amount
  r is risk-free rate
  t is time in years
Now, let's test this in practice:

BSM(S=100, K=100, t=1, s=30%, r=0%, q=5%):
CALL=9.354197236057 PUT=14.231254785986

then:

D = S / 100 * q% = 100 / 100 * 5 = 5

9.354197236057 - 14.231254785986 = 100 - 100 * e(-0 * 1) - 5 * e(-0 * 1)
-4.877057549929 = -5

This is of course wrong!

Why is the Put/Call parity not holding for BSM ? :)
 
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