tag:blogger.com,1999:blog-7905515.post7616101950321849013..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: von Neumann...Mandelbrot?Eric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7905515.post-9797773632506158072009-10-01T14:39:00.550-05:002009-10-01T14:39:00.550-05:00Faxless Payday LoanFaxless Payday LoanFaxless Payday Loanshttp://www.actionpaydayloans.comnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-62842257957668771672008-04-29T07:51:00.000-05:002008-04-29T07:51:00.000-05:00Eric, I share your appreciation for Mauboussin's "...Eric, I share your appreciation for Mauboussin's "More Than You Know." <BR/><BR/>I either disagree or don't understand your comment that "I have paid attention to option prices in the 1980's, options were priced anticipating fat tails, via a volatility smile, yet Mandelbrot would have you believe that no one knows this..." (etc.).<BR/><BR/>According to Wilmott contributor and Morgan Stanley derivatives manager Aaron Brown, in his book "The Poker Face of Wall Street," options prior to October 1987 were priced with a flat volatility surface, not a "smile." He says it was due to a lack of computing power and mental inertia among options traders -- the "shortcut" had worked for so long that it seemed easier than doing the quant work. Brown claims that shortly after the '87 crash, all the options were more "correctly" priced for volatility.<BR/><BR/>So Brown would probably say Mandelbrot makes an important point -- markets didn't use his models pre-'87 crash, and now that they do, it's an improvement.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-62721682477837682712008-04-22T22:00:00.000-05:002008-04-22T22:00:00.000-05:00Of course there was a theory. I had been Hyman Mi...Of course there was a theory. I had been Hyman Minsky's TA the year before, and became a convert to his Financial Instability Hypothesis, and his overall bearishness. Basically, he taught me that we were always on the brink of a financial collapse, which is always predicated by the Fed tightening. The Fed was fighting to keep the dollar strong, and I saw the stresses it was causing, so I thought that the Fed funds rate would keep climbing until the market tanked. Now, I could have bought a fed funds future, but they didn't have options. so I put my money on the stock fall instead. <BR/><BR/>Turned out I was very fortunate, because after the crash, the Fed Funds rate fell about 200 basis points that week.Eric Falkensteinhttps://www.blogger.com/profile/07243687157322033496noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-31269314511544365192008-04-22T21:51:00.000-05:002008-04-22T21:51:00.000-05:00Do we get no insight as to what prompted you to pu...Do we get no insight as to what prompted you to put your life savings into an out-of-the-money put option??? Did something stick out in one of your models or did you just have a hunch?<BR/><BR/>What about your reaction - were you convinced you were a supergenius, then you threw money around recklessly seeking even greater returns, or were you grounded enough to recognize your luck and walk away?Anonymousnoreply@blogger.com