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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 ...


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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