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the creators of Black-Scholes destroyed their options selling fund based on their flawed belief that everyone else had mispriced options, or the black swan poss
by yieldcrv 2y ago
the creators of Black-Scholes destroyed their options selling fund based on their flawed belief that everyone else had mispriced options, or the black swan possibility should have been part of the formula
also Black-Scholes doesnt factor in the liquidity of the underlying asset, in modern times I think this is relevant in determining the utility of an options contract
there are other options pricing formulas
- smabie 2y agoLTCM wasn't really an options selling fund though selling equity options did become a big trade for them Also they were more of advisors in the fund then anything else
- yieldcrv 2y agoYou’re judged by the company you keep
- mhh__ 2y agoIf you mean LTCM then the story is far more dull (i.e. too much leverage, fund goes boom) Ed Thorpe did originally want to setup an options fund (he was the first to trade the model) that he later estimated would've blown up due to various market conditions at the time IIRC