COQ_tal
John Young
jya at pipeline.com
Wed Apr 17 13:17:23 PDT 1996
4-17-96. Fint:
"When rocket scientists crash out of orbit."
Barry Riley essays on the impact of physicists and
mathematicians on finance and economics, while reporting on
a recent article by three physicists critiquing the
shortcomings of the Black-Scholes formula for pricing
options.
The Bouchaud-Iori-Sornette formula for "real world"
options attempts to minimise these residual risks,
especially by applying a more sophisticated mathematical
treatment to the "tails" of the distribution. If the
risks cannot be hedged out, at least they can be reduced
via diversification.
A bracing cocktail for the recent cpunks bar-slappers on
funny-money and unscriving and eye-grit quackers.
COQ_tal
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