tag:blogger.com,1999:blog-6285680995525398922.post8615646298865543354..comments2023-10-25T03:38:18.508-04:00Comments on Amongst the Stars (Deprecated): Sunday Reflection: A Theoretical Model for the Value of DerivativesJoshua Wonghttp://www.blogger.com/profile/00627690311914462248noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6285680995525398922.post-23678508437241045702010-02-05T12:26:04.254-05:002010-02-05T12:26:04.254-05:00Good call. This was an idea I was writing about wh...Good call. This was an idea I was writing about when I was reading the CFA and I was trying to price options. Turns out that this is a very rudimentary (incomplete) version of the Black-Scholes model.<br /><br />Also, if people have good information: as you say, there should be call-put parity to prevent arbitraging.<br /><br />I was trying to say that, but may not have articulated well. I was just excitedly writing about how I would price an option if I had to.Joshua Wonghttps://www.blogger.com/profile/00627690311914462248noreply@blogger.comtag:blogger.com,1999:blog-6285680995525398922.post-17130250339622596272010-02-04T13:21:49.585-05:002010-02-04T13:21:49.585-05:00Hey Josh, I was google'ing again (this time no...Hey Josh, I was google'ing again (this time not for MY name xD) and I ran across your blog. Pretty amazing experience in the middle east I bet! Anyways, I was reading through your blog and I ran across this article. Before your analysis of probabilities and whatnot, you mentioned that the call premium is $5 while the put premium is $2. After analysis of probabilities, you expect a profit of $5.24 per pair sold. However, I would believe no such opportunity will ever arise due to call-put parity (or w/e I understand it to be). With a $5 call and $2 put, I would personally be arbitraging by buying a lot of shares, selling a call, and buying a put for a net profit (GUARANTEED, 100%) of $3 per share for orders executed this way. Talk to you on MSN soon.Unknownhttps://www.blogger.com/profile/05255090972912515381noreply@blogger.com