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An Intuitive Explanation of Black–Scholes

gregorygundersen.com

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Re: An Intuitive Explanation of Black–Scholes

#91

Post by blitzar »

MuffinFlavored wrote: post #90
blitzar wrote: post #87

Earlier quoted context omitted.

Whenever the maths says so - the range you suggest is due to dividends typically collectively paying slightly higher than the risk free rate. Were we to have higher rates and companies not paying dividends en mass then that would be a negative number. How often? I would guess often - especially over the ~100 year history - and not something you would want to have wrong when writing billions in options.

Thank you. I was wrong and thought "/ES contract 24 months out will show what investors/market makers/whoever think the market will grow to in 24 months" I didn't realize it was exclusively (as you said, dividends + ~risk free rate). Is there anything that you are aware of options chain wise (for example, a call 12 months out or 24 months out) that holds any statistical accuracy/merit in "oh, the market collectively…

If collectively the market thinks the price will be 7,000 in a year then the market will collectively buy it now and will continue to do so until it is 7,000 now. The collectively expected price in the future is the FV of todays price.

Re: An Intuitive Explanation of Black–Scholes

#92

Post by MuffinFlavored »

blitzar wrote: post #91
MuffinFlavored wrote: post #90

Earlier quoted context omitted.

Thank you. I was wrong and thought "/ES contract 24 months out will show what investors/market makers/whoever think the market will grow to in 24 months" I didn't realize it was exclusively (as you said, dividends + ~risk free rate). Is there anything that you are aware of options chain wise (for example, a call 12 months out or 24 months out) that holds any statistical accuracy/merit in "oh, the market collectively…

If collectively the market thinks the price will be 7,000 in a year then the market will collectively buy it now and will continue to do so until it is 7,000 now. The collectively expected price in the future is the FV of todays price.

> If collectively the market thinks the price will be 7,000 in a year then the market will collectively buy it now and will continue to do so until it is 7,000 now.

That's for boring dollar cost averaging.

I was saying, is there anything we can look at "proof" on the options chain or futures contracts on what people/"the big boys" are "hedging for/against"?

Re: An Intuitive Explanation of Black–Scholes

#93

Post by tehjoker »

lazide wrote: post #58
tehjoker wrote: post #28

Earlier quoted context omitted.

We'll hit the limit in a few decades or at most a couple centuries due to ecological limits on growth though (unless a robust space economy develops).

What you’re describing is just a variant of Malthusianism [ https://www.intelligenteconomist.com/malthusian-theory/ ], which may not be wrong - but has not proven right either (in modern times) with advances in technology. Especially improvements in energy generation, fertilizer production, and efficient usage of both (often through information technology). Given any stable state of technology/energy/space, a society…

At a certain point, you exceed the ability of the earth to reject heat and the planet becomes venus, though that would take a few more centuries of exponential growth.

It isn't crazy to think that there are physical limits to things.

Malthus projected that populations would grow exponentially, but agricultural yields would grow linearly. He was wrong in that ag yields did keep up and population growth slowed down. One thing to keep in mind is we used fossil fuels and fertile lands to do that, but we are hitting the limits for fossil fuels and we are burning through arable land.

However, there are other physical limits, and some of these are a bit harder to work around. Infinite growth isn't necessary, but a decent life and an equitable distribution of wealth is.

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