SanFran,My conclusions after reading your comments are that: (1) you either didnt read the paper, or (2) you just plain didnt understand it! Why? To quote you: And when the stock market goes to hell and people put their money into bonds, where is that in your model?This is covered in scenarios 2 and 3, both of which involve getting rid of the underlying security (stock) and investing in bonds (short or long term).I can suggest three things before I will even consider replying to your comments next time: (1) find some weekend that suits your moods, (2) read the paper and, most important, (3) understand it before you start spitting out any nonsense!As for your last comment, which I quote:His web site list his papers are more about physics, and now he is getting interested in economics.Youve got a problem with this?! I challenge you, or any other economist for that matter, where ever you think you sit on the intellectual ladder, to come up with an original, publishable idea in physics and I dont mean econo-physics!farmer,This is not a factor model with factors X & Y and was not intended to be one.Youve made a point, however, on the applicability of this to option pricing. I thought about this while writing the paper and I concluded that it is not applicable. The reason is explained in Section 3, titled Limitations. The model basically works for maturity time scales longer than 1 year, which is over the practical range of most typical vanilla options, such as calls and puts. Youll find something on this in an earlier Wilmott thread discussing the tenure limits of an equity option: http://www.wilmott.com/messageview.cfm? ... lick,Where
would the world be without people like you?! Also, thx for pointing out the disclaimer. Another indication that SanFran hurled out his comments without reading the paper!