Abstract: Proof that under constraints of Put-Call Parity, the probability measure for the valuation of a European option is risk neutral under any general probability distribution, bypassing the Black-Scholes-Merton dynamic hedging argument, and without the requirement of complete markets. The heuristics used by traders for centuries are both more robust and more rigorous than held in the economics literature.

http://www.fooledbyrandomness.com/OptionPricing.pdf

Risk Neutral Option Pricing Without Dynamic Hedging, A Measure-Theoretic Proof

Posted on

March 28th, 2014

Category

Academic, General, Links

Nov. 14 (Bloomberg) — Nassim Nicholas Taleb, a professor at New York University and author of “The Black Swan” and “Antifragile: Things That Gain From Disorder,” talks about risks created by government debt and Federal Reserve monetary policy. He speaks with John Dawson on Bloomberg Television’s “First Up” on the sidelines of Barclays Asia Forum in Hong Kong. (Source: Bloomberg)

Nassim Taleb interview with John Dawson on Bloomberg TV’s First Up for Barclays Asia Forum in Hong Kong

Posted on

November 19th, 2013

The Skin In The Game Heuristic for Protection Against Tail Events

Constantine Sandis Oxford Brooks

Nassim Nicholas Taleb NYU-Poly; Université Paris I Panthéon-Sorbonne – Centre d’Economie de la Sorbonne (CES)

July 30, 2013

Abstract: Standard economic theory makes an allowance for the agency problem, but not the compounding of moral hazard in the presence of informational opacity, particularly in what concerns high-impact events in fat tailed domains. But the ancients did; so did many aspects of moral philosophy. We propose a global and morally mandatory heuristic that anyone involved in an action which can possibly generate harm for others, even

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SSRN: Constantine Sandis & Nassim Nicholas Taleb – The Skin In The Game Heuristic for Protection Against Tail Events

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September 12th, 2013

econ-talk-library-of-economics-and-liberty-nassim-talebNassim Taleb of NYU-Poly talks with EconTalk host Russ Roberts about his recent paper (with Constantine Sandis) on the morality and effectiveness of “skin in the game.” When decision makers have skin in the game–when they share in the costs and benefits of their decisions that might affect others–they are more likely to make prudent decisions than in cases where decision-makers can impose costs on others. Taleb sees skin in the game as not just a useful policy concept but a moral imperative. The conversation closes with some observations on the power

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EconTalk with Russ Roberts: Taleb on Skin in the Game

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September 9th, 2013

From Nassim Taleb’s Facebook Page:

Life is Randomness! Life is Antifragility!

More evidence that you are alive if & only if you like volatility. More evidence of Jensen’s inequality (convex response). This article passed my filter, my bi-monthly linking allowance. (via Steven Stogatz)

Stochastic properties of neurotransmitter release expand the dynamic range of synapses.

Yang H, Xu-Friedman MA. Department of Biological Sciences, University at Buffalo, State University of New York, Buffalo, New York 14260.

Release of neurotransmitter is an inherently random process, which could degrade the reliability of postsynaptic spiking, even at relatively large synapses. This is particularly

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Life is Randomness! Life is Antifragility!

Posted on

September 8th, 2013