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The Skinny on Options: Abstract Applications - April 28, 2025 - Black-Scholes Secret: Why Zero Drift Works

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Manage episode 479584862 series 68544
Content provided by tastylive. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by tastylive or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://ppacc.player.fm/legal.
The segment explored how derivatives pricing models like Black-Scholes assume a risk-neutral world (zero drift) instead of the positive drift common in equity markets. This risk-neutral pricing approach is essential for short-term options strategies and explains why at-the-money vertical spreads have 50-50 probabilities, expected moves remain symmetric, and put-call parity exists (with adjustments for dividends and volatility skew).
  continue reading

1501 episodes

Artwork
iconShare
 
Manage episode 479584862 series 68544
Content provided by tastylive. All podcast content including episodes, graphics, and podcast descriptions are uploaded and provided directly by tastylive or their podcast platform partner. If you believe someone is using your copyrighted work without your permission, you can follow the process outlined here https://ppacc.player.fm/legal.
The segment explored how derivatives pricing models like Black-Scholes assume a risk-neutral world (zero drift) instead of the positive drift common in equity markets. This risk-neutral pricing approach is essential for short-term options strategies and explains why at-the-money vertical spreads have 50-50 probabilities, expected moves remain symmetric, and put-call parity exists (with adjustments for dividends and volatility skew).
  continue reading

1501 episodes

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