Reputation
10,218
Next tag badge:
83/100 score
20/20 answers
Badges
2 31 81
Impact
~312k people reached

Jun
20
comment Why Drifts are not in the Black Scholes Formula
Yes, if you differentiate between option pricing ($\mathbb{Q}$) and option valuation ($\mathbb{P}$) in this way I completely agree!
Jun
20
comment Why Drifts are not in the Black Scholes Formula
... The transmission mechanisms are more subtle than that: Sometimes (and today more and more often) it is the derivatives markets that drive the stock markets. You can legitimately ask: What is derivative and what is underlying now?
Jun
20
comment Why Drifts are not in the Black Scholes Formula
I agree that option buying and selling is a means to buy and sell volatility. Concerning the difference between buy and sell side think of it this way: If everything is considered in a risk neutral view no trade would ensue. Of course in reality options are being bought and sold to express a view! And this will of course also influence the price action. Otherwise the extensive literature on "Is it profitable to hold deep OTM options?" wouldn't make sense (e.g. Bondarenko, Ilmanen, Taleb, Falkenstein etc.)
Jun
20
comment Why Drifts are not in the Black Scholes Formula
...and btw I think it makes a huge difference whether you are buy- or sell-side. When you are risk taker you should use $\mathbb{P}$ instead of $\mathbb{Q}$. See e.g. this article: paul.wilmott.com/files/room.zip. Additionally in practice even on the sell side considerations of supply and demand creep back in through the vol parameter and the spread.
Jun
19
answered Heston - How important are the initial guess in calibration and if it is very important, what would be a good way to get initial guess?
Jun
19
revised Malliavin Calculus
added 269 characters in body
Jun
19
answered Malliavin Calculus
Jun
19
comment Why Drifts are not in the Black Scholes Formula
You must be kidding me! Funnily enough this is very similar to what I am doing! I have already assembled quite a bit and also written some draft articles on key concepts! Perhaps we should join forces and publish something together :-)))
Jun
19
comment Why Drifts are not in the Black Scholes Formula
@MattWolf: Thank you, Matt. I agree, the great minds always try to purify the core ideas. They are the ones who are also able to always go back to the basics and connect them to a bigger picture. (BTW I also upvoted your answer because it is really a nice overview of the relevant ideas :-)
Jun
19
answered Is there a name for, or any research on, a system where you try to predict future price by finding a similar price history in the past?
Jun
18
revised Why Drifts are not in the Black Scholes Formula
added 226 characters in body
Jun
18
answered Why Drifts are not in the Black Scholes Formula
Jun
18
reviewed Approve using quantlib function in my c++ program
Jun
7
reviewed Approve Stochastic modeling of stock price process
May
30
answered Time-series similarity measures
May
27
reviewed Approve What does the prefix PX stand for on a Bloomberg Terminal?
May
17
comment What's the first time-integral of price called?
@Tom: Price of what? Derivatives are called that way for a reason.
May
17
answered What's the first time-integral of price called?
May
16
comment Is it random walk?
It is good practice here to share your idea, meaning: Show any work and progress that you have done/made yourself.
May
15
awarded  Notable Question