Derman and Taleb's 'The illusions of dynamic replication': a comment
While as a matter of pure chance and mathematical manipulations, the Black- Scholes formula could have been accidentally obtained much earlier by making use of put-call parity, a simple thought experiment demonstrates the inconclusiveness of any such derivation as regards the validity of the resulting pricing equation. In particular, the use of a non-stochastic discount rate common to both the call and the put op- tions is inconsistent with modern equilibrium capital asset pricing theory. Additional observations are made.
(This abstract was borrowed from another version of this item.)
Volume (Year): 6 (2006)
Issue (Month): 5 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RQUF20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RQUF20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434.
- Jawwad Noor, 2006.
Boston University - Department of Economics - Working Papers Series
WP2006-021, Boston University - Department of Economics.
- Jawwad Noor, 2006. "Menu-Dependent Self-Control," Levine's Bibliography 122247000000001061, UCLA Department of Economics.
- Jawwad Noor & Norio Takeoka, 2011. "Menu-Dependent Self-Control," Boston University - Department of Economics - Working Papers Series WP2011-041, Boston University - Department of Economics.
- W. Pesendorfer & F. Gul, 1999.
"Self-Control and the Theory of Consumption,"
Princeton Economic Theory Papers
99f2, Economics Department, Princeton University.
- Read, Daniel & van Leeuwen, Barbara, 1998. "Predicting Hunger: The Effects of Appetite and Delay on Choice, , , ," Organizational Behavior and Human Decision Processes, Elsevier, vol. 76(2), pages 189-205, November.
- Jawwad Noor, 2005.
"Commitment and Self-Control,"
- Jawwad Noor, 2005. "Commitment and Self-Control," Boston University - Department of Economics - Working Papers Series WP2005-014, Boston University - Department of Economics.
- David Laibson, 1997.
"Golden Eggs and Hyperbolic Discounting,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 112(2), pages 443-478.
- Ted O'Donoghue & Matthew Rabin, 1996.
"Doing It Now or Later,"
1172, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Ted O'Donoghue and Matthew Rabin ., 1997. "Doing It Now or Later," Economics Working Papers 97-253, University of California at Berkeley.
- O'Donoghue, Ted & Rabin, Matthew, 1997. "Doing It Now or Later," Department of Economics, Working Paper Series qt7t44m5b0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Bezalel Peleg & Menahem E. Yaari, 1973. "On the Existence of a Consistent Course of Action when Tastes are Changing," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 391-401.
- John C. Harsanyi, 1955. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparisons of Utility," Journal of Political Economy, University of Chicago Press, vol. 63, pages 309.
- R. H. Strotz, 1955. "Myopia and Inconsistency in Dynamic Utility Maximization," Review of Economic Studies, Oxford University Press, vol. 23(3), pages 165-180.
- Faruk Gul & Wolfgang Pesendorfer, 2001.
"Temptation and Self-Control,"
Econometric Society, vol. 69(6), pages 1403-1435, November.
- Krusell, Per & Kuruscu, Burhanettin & Smith, Anthony Jr., 2002.
"Time orientation and asset prices,"
Journal of Monetary Economics,
Elsevier, vol. 49(1), pages 107-135, January.
When requesting a correction, please mention this item's handle: RePEc:taf:quantf:v:6:y:2006:i:5:p:365-367. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.