4 ms·

This reminds me of a story (I don’t know the authenticity of it) where someone before Black-Scholes had invented the Black-Scholes model but didn’t publish rath

This reminds me of a story (I don’t know the authenticity of it) where someone before Black-Scholes had invented the Black-Scholes model but didn’t publish rather they were making ton of money by putting it to work.

melling 2y ago
That would be Ed Thorp. https://en.m.wikipedia.org/wiki/Edward_O._Thorp https://en.m.wikipedia.org/wiki/Edward_O._Thorp He wrote a book this great book: https://www.amazon.com/Man-All-Markets-Street-Dealer/dp/0812979907/ https://www.amazon.com/Man-All-Markets-Street-Dealer/dp/0812... He’s almost 92 and still around. Here’s a 2022 Tim Ferriss interview: https://youtu.be/gs39QFYIbBY?si=mEABrrb7yDwHR6sK https://youtu.be/gs39QFYIbBY?si=mEABrrb7yDwHR6sK
- testval123 2y ago
  It’s also interesting that Thorp met a young Ken Griffin and gave him some advice/materials in starting out. I don’t think a young Ken Griffin of today would get that same access.
belter 2y ago
Doubt it. If you go to market with Black-Scholes you will lose money. https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=e76dfb7ba25ffd6820b6177041df3e084c06a73c https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&d... "Why We Never Use the Black Scholes Equation" - https://youtu.be/UoGlUZPNouM https://youtu.be/UoGlUZPNouM
- belter 2y ago
  "Warren Buffett: Black-Scholes Formula Is Total Nonsense" - https://youtu.be/H4X-4e7fPgI https://youtu.be/H4X-4e7fPgI
- HFguy 2y ago
  You would make money because the other tools in use at the time were much worse and people were pricing options poorly. So plenty of opportunities. Hence why Ed thorp did well. It will not work today. For starters, it makes a bunch of simplifying assumptions. And there are better models. It also misses a number of important dynamics.
dev-ns8 2y ago
There's also a great story that speaks more towards the detriment of using Black-Scholes as an investment thesis. https://www.amazon.com/When-Genius-Failed-Long-Term-Management/dp/0375758259 https://www.amazon.com/When-Genius-Failed-Long-Term-Manageme...

melling 2y ago

That would be Ed Thorp. https://en.m.wikipedia.org/wiki/Edward_O._Thorp https://en.m.wikipedia.org/wiki/Edward_O._Thorp He wrote a book this great book: https://www.amazon.com/Man-All-Markets-Street-Dealer/dp/0812979907/ https://www.amazon.com/Man-All-Markets-Street-Dealer/dp/0812... He’s almost 92 and still around. Here’s a 2022 Tim Ferriss interview: https://youtu.be/gs39QFYIbBY?si=mEABrrb7yDwHR6sK https://youtu.be/gs39QFYIbBY?si=mEABrrb7yDwHR6sK

testval123 2y ago
It’s also interesting that Thorp met a young Ken Griffin and gave him some advice/materials in starting out. I don’t think a young Ken Griffin of today would get that same access.

belter 2y ago

Doubt it. If you go to market with Black-Scholes you will lose money. https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=e76dfb7ba25ffd6820b6177041df3e084c06a73c https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&d... "Why We Never Use the Black Scholes Equation" - https://youtu.be/UoGlUZPNouM https://youtu.be/UoGlUZPNouM

belter 2y ago
"Warren Buffett: Black-Scholes Formula Is Total Nonsense" - https://youtu.be/H4X-4e7fPgI https://youtu.be/H4X-4e7fPgI
HFguy 2y ago
You would make money because the other tools in use at the time were much worse and people were pricing options poorly. So plenty of opportunities. Hence why Ed thorp did well. It will not work today. For starters, it makes a bunch of simplifying assumptions. And there are better models. It also misses a number of important dynamics.

dev-ns8 2y ago

There's also a great story that speaks more towards the detriment of using Black-Scholes as an investment thesis. https://www.amazon.com/When-Genius-Failed-Long-Term-Management/dp/0375758259 https://www.amazon.com/When-Genius-Failed-Long-Term-Manageme...