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

[facebookpost https://www.facebook.com/permalink.php?story_fbid=10152111753388375&id=13012333374]

 

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. fooled by randomness. com/ Option Pricing. pdf

Nassim Taleb on Richard Dawkins

[facebookpost https://www.facebook.com/permalink.php?story_fbid=10151694181698375&id=13012333374]

[facebookpost https://www.facebook.com/permalink.php?story_fbid=10151694212833375&id=13012333374]

[facebookpost https://www.facebook.com/permalink.php?story_fbid=10151694307533375&id=13012333374]

[facebookpost https://www.facebook.com/permalink.php?story_fbid=10151694307533375&id=13012333374]

[facebookpost https://www.facebook.com/permalink.php?story_fbid=10151695212123375&id=13012333374]

What can we learn from Mr Dawkins’ errors and misuse of probability?