I’ve studied probability theory and option pricing (and naturally everything that’s prerequisite to those topics) and I’m well versed in the tools and concepts Taleb is presenting. Still I find him difficult to follow, and I seem to be the only one in the comments who’ll admit that. I do like his matter-of-fact, no bs approach and he puts a smile to my face every time he calls out some generally accepted concepts to be wrong. Taleb, if you’re reading this, thank you for taking the time to putting out this content. A constructive point of criticism: I believe viewers would benefit more from your videos if you presented in a clearer and pedagogical manner. Cheers!
Hi Mr. Dyreby, Do you have any suggestions in terms of books of option pricing theory ? I already know the ones from Shreve, but I am looking for another one.
For what it's worth, it's also the audio sometimes - at spots here and there, it's hard making out the words (not sure if just me?). Nonetheless, I always enjoy these videos and do hope to see more! Edit: thought I knew what the audio issue was, then discovered I didn't :/
Hi Nassim, One question that’s always puzzled me on this point why your book Dynamic Hedging goes into so much detail on the Greeks of BSM if traders do not use this. I always thought the justification was that the flaws with BSM are known and traders are able to fudge where needed. This video indicates that BSM isn’t used at all which seems inconsistent to me. Can you point out where I am mistaken please? Loving the lecture series!
So where does this recant leave the revered VIX (formulated from Black-Scholes)? I remember _We Don't Quite Know What We are Talking About When We Talk About Volatility_ fondly.
Great insight, I think I have to get deeper into the subject in order to understand 100% what you're teaching, is there any book you would recommend to learn the basis stochastic analysis for undergraduates? Thank you Mr Taleb, I appreciate the time you take making this videos.
As an introduction I can greatly recommend: “An Introduction to the Numerical Simulation of Stochastic Differential Equations”. With its emphasise on simulation you will get an intuitive understanding of these complex mathematical objects. I can give you the hint to program along but in a different programming language. If you are more in a theoretical side and are a math or physics major you should take a look at: “Introduction To Stochastic Calculus With Applications”. I learn so much from this, but it is very technical and I would recommend it only to an advanced undergraduate or graduate student. Have fun :)
Professor or anyone, can you determine the price of an option in a panic sitaution? Lets say, today is Thursday, MSFT reported pre market. Yesterday's close was 250. Pre market was 230 (negative earnings suprise)..and when the market opened price dropped further to 220- within the first 10 minutes. This kind of sutation happens frequently generally at least once a day. How can someone define call options price in that situation for 225 strike price expring on Frday, the next day. At 220, how much should i pay for that 225 call as I will have less than 31 hours for the options to expire.
hi nassim , I hope you are doing okay , would you kindly share with us what did you notice on the screen the day before 2008 market crash started and which alarmed you great deal I mean which greek(s) ? and which decisions did you take on that day to protect your holdings ?
I have read all major books frm Taleb. (no need to say i am a fan) Now seeing him write math with chalk on a blakboard convinces me that he is also a good professor 😂
Professor, on a related note. In one of your books you once wrote that options traders in the Pits weren't using Black Scholes to price options and were instead pricing options "off-sheets" off the butterfly, could you clarify what that meant? I've always been curious what that meant and/or if you could give an example? A model free way of pricing options seems pretty interesting.
The ATM straddle as % of spot quotes the spot IV. The smile. Butterflies quote IV diff accross ATM and Short wing strike of the fly. The skew. A risk reversal quote IV diff across put and call strike of same moneyness. The Parity Using these three relationship you can price any otm strikes, be it a call or put. Simple.
The paper mentioned in ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-UoGlUZPNouM.html is Why we have never used the Black-Scholes-Merton option pricing formula, EG Haug, NN Taleb - Social Science Research Network Working Paper, 2008
You are a notorious critic of micro and macro economics but I would love to hear eactly what in these fields you think is bullshit. From what I understand it is the DSGE models in macro, but I¨ve never heard any precise critique of micro.
Can someone please help me to know what math book to read so that I understand those letters and squiggles? I’m not bad at abstract concepts and math, I just didn’t take a lot of it in high school and college once they stopped forcing me. Do I need a Stat 101 book? 103? Integral Calculus? 101 or 201? I just need a little direction here.
All the Greek notation comes from stochastic differential equations. Mathematical statistics, real analysis, and partial differential equations will get you prepared for that.
Try and understand intuitively with some related real life examples what the equation is trying to tell you and work back with the specific maths concepts or rather tools that are used to express the reality
There is a fucking math formula. You take your numbers and put them in the formula equation and with the help of "CAS in Word" or Excel Sheet you can get the response of your normal calculation regarding price option in fucking math formula.
If the Bachelier formula gives different result, it creates an arbitrage to make money. If there is an arbittrage, where is the error of Black and Scholes formula? The only difference he is telling is considering the lognormal returns for calculating volatility?
the error is in the egregious mispricing during rare events. you're making the mistake of assuming that a better pricing formula should give a better price all the time or most of the time. that is not true. it only needs to perform better on average, which is more about defending against extreme price changes of the underlying asset rather than trying to maximize the proportion of the time you make money.