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by bearish
Today, 1:47 am
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 68
Views: 6056

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

I’m sorry. I don’t. I’m very mild mannered. At the same time, I do think the standard paradigm is a pretty reasonable starting point, into which one can try to insert various kinds of real world complications. Like transaction costs and other problems that prevent even simple claims from being perfe...
by bearish
Today, 12:55 am
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 68
Views: 6056

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

So you want to postulate a model with totally unreasonable parameters, making no sense whatsoever, and then use the existence of said model to argue that the modeling framework is wrong? Isn’t that a bit like saying that a car, driving at a speed of 99% of the speed of light, is very implausible, an...
by bearish
Yesterday, 11:05 pm
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 68
Views: 6056

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

Sorry, I interrupted myself. By the time our continental colleagues got to NFLVR, I lost a bit of enthusiasm, but I like this little note by Freddy and Wally: https://www.ams.org/notices/200405/what-is.pdf Aside from the fact that they manage to repeatedly say Cox-Ingersoll-Ross when they meant Cox-...
by bearish
Yesterday, 10:46 pm
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 68
Views: 6056

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

Please, can we call it “a replicating portfolio”? As I was typing that, the word tallywhacker came to mind, for reasons that should be obvious.
by bearish
Yesterday, 12:08 am
Forum: Off Topic
Topic: Russia земля борца самбо
Replies: 405
Views: 31697

Re: Russia земля борца самбо

Maybe we should focus less on him and more on the ordinary Russians who are committing war crimes and other atrocities by the tens of thousands.
by bearish
Yesterday, 12:03 am
Forum: Politics Forum
Topic: Trump -- the last 100 days
Replies: 4518
Views: 347552

Re: Trump -- the last 100 days

Yes, but, as far as we can tell, not specificly motivated by the Jan 6 sedition case. That being said, evidence found under a lawful warrant motivated by an investigation into crime A can happily be used in the prosecution of case B, C, D, etc. So this could still lead to his hanging. Wishful thinki...
by bearish
August 8th, 2022, 7:49 pm
Forum: Politics Forum
Topic: Who should I vote for?
Replies: 20
Views: 458

Re: Who should I vote for?

8 turns out to be the magic “number” to determine the possible “shapes”.
by bearish
August 8th, 2022, 6:50 pm
Forum: Off Topic
Topic: Stupid question of the day
Replies: 2760
Views: 247724

Re: Stupid question of the day

No. Why would you even ask that? Surely there must be other stupid questions to be asked today!
by bearish
August 8th, 2022, 6:48 pm
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 68
Views: 6056

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

I’d like to blame Marsden for his unconventional use of [$] \mu [$], but that’s probably not fair. With a negative drift, my first property will not hold, though, since then the process will tend to go zero in all relevant senses.
by bearish
August 8th, 2022, 2:37 pm
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 68
Views: 6056

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

I should have written If  0.5σ 2  > r - μ > 0  then  S t  = e μt + σW(t)   has the property that  lim t→∞ E [ S t  - e rt ]  = ∞  but  lim t→∞ ( S t  - e rt )  < 0  almost surely. Bearish, your " lim t→∞ S t   = 0 " is wrong, which is probably what is causing the confusion. I don't know i...
by bearish
August 8th, 2022, 1:28 am
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 68
Views: 6056

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

I’m pretty sure I wrote what I meant to write. Your statements are true, too, but I saw no particular reason to bring the money market account into play. We can set [$] r = 0 [$] and we’ll all be happy.
by bearish
August 8th, 2022, 12:19 am
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 68
Views: 6056

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

I mean, you could do that, and the result would be very different. Or you could raise the whole thing to the power of 17, and it would also be different. And, likewise, probably not in an interesting way.
by bearish
August 8th, 2022, 12:16 am
Forum: Book And Research Paper Forum
Topic: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."
Replies: 68
Views: 6056

Re: "Option Pricing, Risk Premium, and Arbitrage: An Argument for Volatility-Modified Risk-Neutral Prices."

The standard martingale theory approach to model replication, pricing, etc. always comes with a bounded time horizon, to avoid problems of this sort. The law of large numbers prevents non-trivially different measures from being equivalent in the limit as time goes to infinity. Another version of yo...
by bearish
August 7th, 2022, 8:57 pm
Forum: General Forum
Topic: Dual hybrid option
Replies: 3
Views: 140

Re: Dual hybrid option

To be honest, I just eyeballed the implied vol at that strike in the low 20’s and figured the skew was going to work against you. I did not actually do the real calculation, although I don’t think that should be too hard. And then, yes, I think it is appropriate to apply a haircut of sorts to accoun...
by bearish
August 7th, 2022, 7:31 pm
Forum: Off Topic
Topic: Italy, land of trash.
Replies: 574
Views: 107400

Re: Italy, land of trash.

Aww - it couldn’t have happened to nicer people! Unlike Italy, the people behind Dominos are indeed trash.