Why Care About Variance in Option Pricing?
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Date: 01-23-2006
Start Time:
6:00pm
End Time: 7:30pm
Speaker: Nassim Nicholas Taleb, Empirica Inc and University of Massachusetts, Amherst
Location: 412 Schapiro CEPSR, Davis Auditorium
ABSTRACT
This presentation shows how variance is neither necessary nor even relevant for
pricing, hedging, and using option products. Furthermore, whether variance is
infinite or finite makes minimal difference in a power law environment. We look
at the inapplicability of the dynamic hedging paradigm to financial prices and
derive conclusion on more robust option pricing and risk management.
BIO
Nassim Nicholas Taleb is a veteran option trader. He is currently a Dean's Professor in the Sciences of Uncertainty at the University of Massachusetts, Amherst.