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>From what I know about LTCM, they didn't go bust because of any shortcomings
of BS equation. They simply didn't take into account 3 major things, other
than thinking they could do no wrong.
1) The markets can remain "irrational" far longer than they can remain
solvent
2) Sovereign nations do default on their debt (Russia)
3) Too much (well, way too much) margin.
The inputs to their models was based on faulty assumption. The Russian
default totally killed their volatility assumption.
BS is just fine.
Abhijit
----- Original Message -----
From: "Gerald Marisch" <gerald388@xxxxxxxxxxx>
To: "Omega Chat" <omega-list@xxxxxxxxxx>
Sent: Wednesday, March 31, 2004 1:49 PM
Subject: Black Schoales
> Anyone recall the name of the video that detailed some NY firm going bust
> for billions by using the Black Schoales (spl?)option pricing model?
>
> Inquiring minds want to know! Thanks in advance.
>
>
>
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