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In effect, you are wondering whether to price this option on risk-free probability distributions (B-S drift $r_f$), or real-world ones (B-S drift $\mu$, however calibrated) One cannot short the mutual fund, so the argument for using risk-free is weakened. But, there are various economic equilibrium arguments why using it may still be OK. If you use the ...


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The single most important fact to keep in mind when reviewing a fund is that there is no single most important fact. Left tail risk in a fund investment exists for a huge number of reasons. This could range from back office compliance, risk management/derivative use policies to the possibility that the strategies they're running are negatively skewed which ...



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