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/sci/ - Science & Math

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11955513 No.11955513 [Reply] [Original]

Is it legit?

>> No.11955567

>>11955513
No, the black-scholes model is a retarded meme that has caused plenty of crisis

>> No.11955625

>>11955513
Yes, but you need to have the IQ to actually apply this.
>>11955567
Low IQ take.

>> No.11955899

Lol, fuck no.
Renaissance tech, was doing no better than an index fund until they started using machine learning.
That's what all major institution do now, they infer from gigantic amounts of data.
They certainly do not use piddly mathematical models.

>> No.11955942

Mathematical finance is a scam. After reading all these books you'll realize that all these martingale models literally rely on the assumption that you can never beat the market.

>> No.11957354

>>11955625
>IQ
anon...

>> No.11957368

>>11955567
fpbp

>>11955625
Black-Scholes only works in European markets.

>> No.11957495

>>11957368
black scholes only works if you're backstopped by a central bank

>> No.11957787

>>11955513

No. Options do not follow the black-scholes equation. The assumption of constant volatility is laughable.

>> No.11958083

>>11957368
Black-Scholes literally never works
the guys who came up with it lost money when they tried to apply it
But that's not surprising, since it relies on a long list of unfounded assumptions and there's no way to actually measure one of its most important parameters: market volatility
It's a horoscope for coked-up wallstreet psychos gambling with other poeple's money

>> No.11958246

>>11955513
is the 5th edition of the first book in pic ok?

>> No.11958305

>>11955513
What do I need to read before I can understand the first book about probability?

>> No.11958431

>>11958305
Calculus
Real analysis
Measure theory

>> No.11959193

Going to a top grad program for this. Feel free to ama

>>11958305
Get Shreve's Stochastic Calculus for Finance I & II instead. It is more self contained. Volume I builds up the theory with the discrete case, which makes Volume II more intuitive, especially if you don't have a heavy math background. Plus both have exercises.


>>11955942
The purpose is not to beat the market, but to price options that cannot be arbitraged and hedge portfolio risk.

>>11957368
>European Markets
BSM models European options not markets. The fundamental theory can be extended to other more exotic options as well.

>> No.11959496

>>11955513
its a very bare bones approach but the latter two books are very legit, allthough it seems like brownian motion and stoch calc is a way too punishing intro to SDE's. Brownian motion by Schilling is your friend

>> No.11959501

>>11959496
it has exercises and solutions to them by the author

>> No.11959506

>>11959193
Just don't do gambling with options. Then you don't have to hedge any risk. Seems like a simpler solution to me.