Robert Fefferman is the best teacher I have ever taken a course from. He is also among the finest human beings I have ever met. I decided to go to graduate school in mathematics after taking his Partial Differential Equations class in the spring of 1988. To this day, I often mention him and quote him to my students, both graduate and undergraduate, and even to my children.
The only people to have a good word to say for the B-S formula is another Chicago firm, namely the C.M.E. and I have to admit that CME. are doing rather well but they don't use it to see into the future as there is a fatal flaw in the calculus but they have brought out their own "volatility index"; commonly known as "The Fear Index" but this can be updated every day and even more often. J.P.Morgan now have the "Value at Risk" formula also updated daily but still based on poor foundations.
There are so many faults in this sum that it hard to know where to begin; but it is very entertaining. Let us look at the handling of Time in this sum. The combination of time and exponential (e) is a very powerful mixture and if you add in an interest rate you could have an explosion as Harvard found to their cost when they used a 40 year credit interest rate swap (a derivative?) and had to be bailed out with the loss of millions; so that today time has been cut to even one day in some circumstances
Sir I recently met that rarest and most precious of all creatures right here in Inverness; namely a qualified mathematician who can actually do financial maths properly and when I told her about the only thing in The B.-S. Formula which resembles an Interest rate is non viable; namely Le to the minus (r t) it only took her 30 seconds to say "that's not right.". So it must be the "Discounted Time Value of Money" and if that is so then the Inverse of this, Le to the + (r t) is the Interest Rate used in the B-S. sum . Now that's not a very low rate.
The B-S formula uses the wrong Gaussian distribution curve since Gauss had at least three others and if you look at the one with 5 s.d.,s it is almost a straight horizontal line so what would a 25 S. D. Distribution curve look like? Utterly useless I assume? Ito's Calculus's looks awfully like a ballistic trajectory which means it uses Velocity not Volatility and that is why they have to use "IMPLIED" Volatility what are your thoughts on this?
can you analyse the Black-Scholes formula for it appears that Harvard can't after their financial disaster with JPM. You are in my ears just now and are talkin about pricing options. james hilferty
Dear Bob I have just come across a video where Bob Merton Admits to MIT. that the Black- Scholes Formula doesn't work and I congratulated him on his new found Honesty. Personally I think that he had just run out of excuses like "The hundred year storm" or "the financial infrastructure hasn't caught up with new financial innovation". I particularly liked Alan Greenspan's excuse "even sophisticated algorithms can't allow for the DISCONTINUITIES in e
Dear Bob I have been racking my brains trying to discover why Mathematicians have been less than wise over the last 44years (b-s formula) and I may have found the reason. I was just thinking of the simple sum I gave you all and as yet no one has done it correctly as far as I know. Mathematicians quite simply can't grasp the meaning of the Entity called Time. I remembered the diagram I used to do this sum and unusually it had no top or bottom to it.Time is a one Dimensional Linear entity and mathematicians seemingly can't handle this Its not my fault that Physics is intruding into maths.
I joked that I would need to teach the greatest mathematician in America some facts on economics, but now I see that I will need to include Calculus as well. That means that the heat now focuses on UCLA and their calculus department Do you (UCLA) not find major errors in The Black - Scholes formula? Never mind all the other faults just concentrate on the calculus and on the wrongly labeled Time .zones I would like to thank Teri Tao for his paper on this very subject I thoroughly enjoyed it.
There are many errors in the B.-S. formula: fatal errors like the fact exponential (e) is to the wrong power supposedly to give the forward discounted value of (K) but no one in their right mind would use (daily compounded rates to the negative power) for this. There is a correct formula for this but it doesn't include exponential (e). My wife thinks that the Gaussian Normal Distribution Curve is rather pathetic in predicting the outcome
The question is "Does the Black -Scholes -Merton formula actually work?" The answer is either Yes or No. Now, Merton admits that it doesn't. Scholes doesn't seem to know and Black is dead and so is Friedman and Samuelson. Samuelson appeared to recant just before he died and admitted that "If something is too good to be true then it probably is" We got that in primary school with that great economist "Aesop" and his fables. Now it's no big deal that you got it wrong since most others did too.
The question is should he be teaching maths? Not is he a good man. The University of Chicago has a bad name in econometrics (I faintly doing a partial dif, eq in that very subject) perhaps the only PDE to work in economics. The thing is he should stick to maths and not mess up economics like they have done for the last forty two years Chicago can dish it out, now take a little dose of mathematical reality Do a little "Reductio ad abaurdum" and some "Ex post facto" (Ito' calculus)
I have a big problem for you. How do you divide up "Yesterday, Today and Tomorrow using Cartesian co-ordinates; I should warn you that this is a "Quantum Maths" sum and no one has done this correctly in the last 44 years or in the period of the "New American Maths". Neither Milton Friedman nor Eugene Fama has done this sum correctly, nor the University of Chicago nor the Greatest mathematician in America. P.S. Bob I'm looking for a job! I can also point out another five fatal flaws in N.A.M.s
PS. Cambridge University and The London School of Economics are just as stubborn and they wont admit that the b-s. formula doesn't work even after Bob Merton admitted on camera that it didn't. Right enough if Howard Davies (AKA Harry Hindsight) was in charge of the LSE. I can see why they git it wrong.
It's really quite simple to dissprove the B.- S. Formula; if you look at the Trillion Dollar version of the sum you will see that no viable Interest Rate is given and since "Le^-rt is less than unity ( one), where is it. This is something LTCM. found out to their cost when they had to be bailled out in order to save the American economy.
Robert Fefferman is the best teacher I have ever taken a course from. He is also among the finest human beings I have ever met. I decided to go to graduate school in mathematics after taking his Partial Differential Equations class in the spring of 1988. To this day, I often mention him and quote him to my students, both graduate and undergraduate, and even to my children.
Cheer for my beloved math teacher, R. Fefferman!
The only people to have a good word to say for the B-S formula is another Chicago firm, namely the C.M.E. and I have to admit that CME. are doing rather well but they don't use it to see into the future as there is a fatal flaw in the calculus but they have brought out their own "volatility index"; commonly known as "The Fear Index" but this can be updated every day and even more often. J.P.Morgan now have the "Value at Risk" formula also updated daily but still based on poor foundations.
James Hilferty, what on Earth are you doing?
i think he's not on earth
There are so many faults in this sum that it hard to know where to begin; but it is very entertaining. Let us look at the handling of Time in this sum. The combination of time and exponential (e) is a very powerful mixture and if you add in an interest rate you could have an explosion as Harvard found to their cost when they used a 40 year credit interest rate swap (a derivative?) and had to be bailed out with the loss of millions; so that today time has been cut to even one day in some circumstances
Sir I recently met that rarest and most precious of all creatures right here in Inverness; namely a qualified mathematician who can actually do financial maths properly and when I told her about the only thing in The B.-S. Formula which resembles an Interest rate is non viable; namely Le to the minus (r t) it only took her 30 seconds to say "that's not right.". So it must be the "Discounted Time Value of Money" and if that is so then the Inverse of this, Le to the + (r t) is the Interest Rate used in the B-S. sum . Now that's not a very low rate.
The B-S formula uses the wrong Gaussian distribution curve since Gauss had at least three others and if you look at the one with 5 s.d.,s it is almost a straight horizontal line so what would a 25 S. D. Distribution curve look like? Utterly useless I assume? Ito's Calculus's looks awfully like a ballistic trajectory which means it uses Velocity not Volatility and that is why they have to use "IMPLIED" Volatility what are your thoughts on this?
can you analyse the Black-Scholes formula for it appears that Harvard can't after their financial disaster with JPM. You are in my ears just now and are talkin about pricing options. james hilferty
Dear Bob I have just come across a video where Bob Merton Admits to MIT. that the Black- Scholes Formula doesn't work and I congratulated him on his new found Honesty. Personally I think that he had just run out of excuses like "The hundred year storm" or "the financial infrastructure hasn't caught up with new financial innovation". I particularly liked Alan Greenspan's excuse "even sophisticated algorithms can't allow for the DISCONTINUITIES in e
SE(X) equation
What about Harvard! and "Forward interest swaps"?
Dear Bob I have been racking my brains trying to discover why Mathematicians have been less than wise over the last 44years (b-s formula) and I may have found the reason. I was just thinking of the simple sum I gave you all and as yet no one has done it correctly as far as I know. Mathematicians quite simply can't grasp the meaning of the Entity called Time. I remembered the diagram I used to do this sum and unusually it had no top or bottom to it.Time is a one Dimensional Linear entity and mathematicians seemingly can't handle this Its not my fault that Physics is intruding into maths.
I joked that I would need to teach the greatest mathematician in America some facts on economics, but now I see that I will need to include Calculus as well. That means that the heat now focuses on UCLA and their calculus department Do you (UCLA) not find major errors in The Black - Scholes formula? Never mind all the other faults just concentrate on the calculus and on the wrongly labeled Time .zones I would like to thank Teri Tao for his paper on this very subject I thoroughly enjoyed it.
There are many errors in the B.-S. formula: fatal errors like the fact exponential (e) is to the wrong power supposedly to give the forward discounted value of (K) but no one in their right mind would use (daily compounded rates to the negative power) for this. There is a correct formula for this but it doesn't include exponential (e). My wife thinks that the Gaussian Normal Distribution Curve is rather pathetic in predicting the outcome
The question is "Does the Black -Scholes -Merton formula actually work?" The answer is either Yes or No. Now, Merton admits that it doesn't. Scholes doesn't seem to know and Black is dead and so is Friedman and Samuelson. Samuelson appeared to recant just before he died and admitted that "If something is too good to be true then it probably is" We got that in primary school with that great economist "Aesop" and his fables. Now it's no big deal that you got it wrong since most others did too.
The question is should he be teaching maths? Not is he a good man. The University of Chicago has a bad name in econometrics (I faintly doing a partial dif, eq in that very subject) perhaps the only PDE to work in economics. The thing is he should stick to maths and not mess up economics like they have done for the last forty two years Chicago can dish it out, now take a little dose of mathematical reality Do a little "Reductio ad abaurdum" and some "Ex post facto" (Ito' calculus)
He's good but he's no Fefferman
I have a big problem for you. How do you divide up "Yesterday, Today and Tomorrow using Cartesian co-ordinates; I should warn you that this is a "Quantum Maths" sum and no one has done this correctly in the last 44 years or in the period of the "New American Maths". Neither Milton Friedman nor Eugene Fama has done this sum correctly, nor the University of Chicago nor the Greatest mathematician in America.
P.S. Bob I'm looking for a job! I can also point out another five fatal flaws in N.A.M.s
PS. Cambridge University and The London School of Economics are just as stubborn and they wont admit that the b-s. formula doesn't work even after Bob Merton admitted on camera that it didn't. Right enough if Howard Davies (AKA Harry Hindsight) was in charge of the LSE. I can see why they git it wrong.
It's really quite simple to dissprove the B.- S. Formula; if you look at the Trillion Dollar version of the sum you will see that no viable Interest Rate is given and since "Le^-rt is less than unity ( one), where is it. This is something LTCM. found out to their cost when they had to be bailled out in order to save the American economy.