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Derivatives Documentary

  • #1
  • First Post: Sep 2, 2010 3:32pm Sep 2, 2010 3:32pm
Posted on a couple of other forums, a somewhat woolly history of option pricing...

http://www.moneytec.com/forums/media...details&mid=74
http://www.moneytec.com/forums/media...details&mid=75
http://www.moneytec.com/forums/media...details&mid=89
http://www.moneytec.com/forums/media...details&mid=90
The breaking of a wave cannot explain the whole sea.
  • #2
  • Sep 2, 2010 4:29pm Sep 2, 2010 4:29pm
Hey thank you very much, it is very appreciated!
  • #3
  • Sep 2, 2010 4:33pm Sep 2, 2010 4:33pm
Ta, folks that are interested in this stuff should look a bit more into the details of the LTCM failure, the documentary makes it out to be some type of mystical failure of the BSM framework, in reality it was simply bad risk management.
The breaking of a wave cannot explain the whole sea.
  • #4
  • Edited 6:45pm Sep 2, 2010 5:08pm | Edited 6:45pm
Quoting Craig
in reality it was simply bad risk management.
It always is... Thanks for the links, very cool.
  • #5
  • Sep 2, 2010 8:30pm Sep 2, 2010 8:30pm
Thanks Craig -
Time hides Nothing
  • #6
  • Sep 2, 2010 8:32pm Sep 2, 2010 8:32pm
Good stuff! Thanks for the vid links.

There's a great article on Wikipedia about LTCM
At least some of what on there was intentional and fraudulent in nature.
  • #7
  • Sep 2, 2010 9:10pm Sep 2, 2010 9:10pm
Thanks.
  • #8
  • Sep 5, 2010 7:40am Sep 5, 2010 7:40am
Quoting Craig
Posted on a couple of other forums, a somewhat woolly history of option pricing.......
the last link above is Part 5
here is Part 4
Thanks for the links!

Inserted Video
  • #9
  • Sep 5, 2010 8:55am Sep 5, 2010 8:55am
Quoting Craig
Ta, folks that are interested in this stuff should look a bit more into the details of the LTCM failure, the documentary makes it out to be some type of mystical failure of the BSM framework, in reality it was simply bad risk management.
BSM is fundamentally flawed. Otherwise why do traders correct for the volatility smile? It should come out naturally from the equations.

About risk management: http://papers.ssrn.com/sol3/papers.c...act_id=1669317
  • #10
  • Sep 5, 2010 12:08pm Sep 5, 2010 12:08pm
for those of you interested in floor hand signals (as seen in the video)

http://tradingpithistory.com/

make sure to check out participants
Invincibility lies in the defence, the possibility of victory in the attack
  • #11
  • Sep 5, 2010 3:01pm Sep 5, 2010 3:01pm
Quoting supremeChaos
the last link above is Part 5
here is Part 4
Thanks for the links!

http://www.youtube.com/watch?v=mwwHD...eature=related
Cool, thanks for that, I though the story seemed to jump ahead (duh!).
The breaking of a wave cannot explain the whole sea.
  • #12
  • Sep 5, 2010 3:05pm Sep 5, 2010 3:05pm
Quoting Adal
BSM is fundamentally flawed. Otherwise why do traders correct for the volatility smile? It should come out naturally from the equations.

About risk management: http://papers.ssrn.com/sol3/papers.c...act_id=1669317
Just to clarify my other statement before anybody else misses the point, I wasn't trying to say that BSM is perfect model, anybody who studies it knows the premises on which it is built (Gaussian underlying, continuous hedging, constant volatility etc) are unrealistic.
The breaking of a wave cannot explain the whole sea.
  • #13
  • Sep 5, 2010 11:04pm Sep 5, 2010 11:04pm
Quoting silverheat
for those of you interested in floor hand signals (as seen in the video)...
make sure to check out participants
floor hand signals! many thanks
i've always been curious about that.
  • #14
  • Last Post: Sep 6, 2010 11:35am Sep 6, 2010 11:35am
Quoting Craig
Ta, folks that are interested in this stuff should look a bit more into the details of the LTCM failure, the documentary makes it out to be some type of mystical failure of the BSM framework, in reality it was simply bad risk management.
There is also a quite good book written about LTCM, "a genius that failed". Worth reading and IMHO states quite clearly that risk management and trading [extremely] illiquid instruments was what really killed them.
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