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QuoteOriginally posted by: crowlogicYup. So, are stock prices turbulent or follow a BM? I think the former.i'm not sure. they seem to show BM-type behavior sometimes. maybe they're like dying sperm cells, i.e. have little character, but not too much to ignore random influences

QuoteOriginally posted by: jawabeanQuoteOriginally posted by: crowlogicYup. So, are stock prices turbulent or follow a BM? I think the former.i'm not sure. they seem to show BM-type behavior sometimes. maybe they're like dying sperm cells, i.e. have little character, but not too much to ignore random influences Maybe the prices are constantly undergoing phase-transition between the random and deterministic influences.

QuoteOriginally posted by: NIn fact, Black Scholes is never used either (another math orgasm).How do you reconcile your belief with p. 114 of Taleb's Dynamic Hedging or p. 44 of Natenberg's Option Volatility & Pricing? Note: I am not claiming that Black-Scholes is the be-all and end-all of option pricing models. Obviously, we now have SABR, etc. What I'm saying is that Black-Scholes (or variants like Black's model for futures options) has been heavily used by traders in the past and is still used now (SABR can output Black vols that can be fed to a Black pricer to get dollar prices).

QuoteOriginally posted by: propertyrightsQuoteOriginally posted by: NIn fact, Black Scholes is never used either (another math orgasm). What I'm saying is that Black-Scholes (or variants like Black's model for futures options) has been heavily used by traders in the past and is still used now (SABR can output Black vols that can be fed to a Black pricer to get dollar prices).it's used even in accounting standards such as FAS133

What a bloody waste of time it was following this thread. I thought we might get somewhere, but N just refused to say what he was talking about in a manner that others could understand. And it's not because I don't get the maths, physics and all the rest that N was spouting. I do understand, but N's comments weren't even wrong.

I believe some of the reasons causing the disagreements around "Brownian Motion" are due to the same fundamental reasons leading to different determinations of what "random" is. See ANKS Ch.10 "Processes of Perception and Analysis" p552, "Defining the Notion of Randomness". He discusses the practical and theoretical concerns about the existence of randomness, specifically how you can really really "random looking" data out of cellular automata which passes all known statistical tests but actually has a very small "minimum description length" by iterating 2d grid based CA. If you want to do MC simulation then just making "random" numbers might suffice but its no replacement for the more concrete/combinatorial permutation enumeration viewpoint.