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September 4th, 2009, 6:29 am
Forum: Student Forum
Topic: is derivatives price is a price?
Replies: 40
Views: 38559

### is derivatives price is a price?

<t>i think basically the point is, BS is inaccurate model of real price dynamics as its founded on some assumptions which look good from afar but not from aclose. i concur, before diving into the formulas its worth while considering whether the formulas are a good model of reality. Whats the point o...
September 3rd, 2009, 1:43 am
Forum: Student Forum
Topic: is derivatives price is a price?
Replies: 40
Views: 38559

### is derivatives price is a price?

<t>"if you buy the stock your return is 99% with some chance of going bankrupt, with the arbitrage I outlined, your return is infinite with no chance of going bankrupt. The second strategy dominates all others."u make 99% on strategy 1 and 80% on strategy2 per unit invested? in my understanding opti...
September 3rd, 2009, 12:54 am
Forum: General Forum
Topic: Nonlinear properties of market prices are as important as economic fundamentals
Replies: 19
Views: 37197

### Nonlinear properties of market prices are as important as economic fundamentals

because not everyone can see every pattern, nonlinear dynamics captured by propdesks system might be good but as we can see from the skeptics in this thread many people reject it as illusions and hug emh, thus arbitrage is created
September 2nd, 2009, 10:07 pm
Forum: Student Forum
Topic: is derivatives price is a price?
Replies: 40
Views: 38559

### is derivatives price is a price?

<t>1. existence of highly paid traders => arbitrage opportunities exists in markets 2. risk is never neutralised, only transformed, people who play with options are only changing the thing they're gambling on3. " Stock priced 1 will be 2 with p=0.999 or 0 with p=0.001. The BS price for this option i...
September 1st, 2009, 3:11 pm
Forum: General Forum
Topic: Is the Markov assumption plausible ?
Replies: 12
Views: 36251

### Is the Markov assumption plausible ?

thats right , is it common practise in industry? pattern mining
September 1st, 2009, 3:52 am
Forum: General Forum
Topic: Is the Markov assumption plausible ?
Replies: 12
Views: 36251

### Is the Markov assumption plausible ?

there may be recuring nonlinear patterns which autocorrelations can no way detect, id think autocorrelaitons is a very crude method of looking at very complex structure
August 31st, 2009, 4:40 pm
Forum: Student Forum
Topic: Markov property plausible ?
Replies: 18
Views: 36439

### Markov property plausible ?

<t>to be honest my issue is this: alot of assumptions are made in options models such as black scholes, which are unrealistic to begin with, then alot of blah blah blah mathematical complexity+precision is caked on top.. whats the point of calibrating your F1 car when u cant guarantee what type of r...
August 31st, 2009, 2:19 pm
Forum: Student Forum
Topic: Markov property plausible ?
Replies: 18
Views: 36439

### Markov property plausible ?

hi alan, say for example we found the following was true: price moves down 4 days in a row => price likely to go up on the 5th day price moves up 4 days in a row => price likely to go down in the 5th daywould the scenario above be captured by the state mechanism
August 31st, 2009, 3:07 am
Forum: Student Forum
Topic: Markov property plausible ?
Replies: 18
Views: 36439

### Markov property plausible ?

group similar patterns together and see what they say about next day returns, the distribution of returns forecast by some groups are quite different from the long term returns distribution , which is normally assumed normal or some skewed variation right ?
August 29th, 2009, 3:33 pm
Forum: Student Forum
Topic: Markov property plausible ?
Replies: 18
Views: 36439

### Markov property plausible ?

<t>Hi posted in general forum but no replies so maybe this question is too elementry for there so. ..is it correct that markov property is assumed in log returns in alot of options pricing theory ?Is such an assumption plausable since temporal patterns may be very evident in the log returns time ser...
August 29th, 2009, 1:16 pm
Forum: General Forum
Topic: Is the Markov assumption plausible ?
Replies: 12
Views: 36251

### Is the Markov assumption plausible ?

Hi is it correct that markov property is assumed in log returns in alot of options pricing theory ?Is such an assumption plausable since temporal patterns may be very evident in the log returns time series.

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