Before Black-Scholes

Discussion in 'Options' started by TradingPilot, May 1, 2007.

  1. How the heck did you guys trade before the Black-Scholes model??:confused:
     
  2. Qualitative heuristics
     
  3. Ed Thorp had a pricing model that anticipated Black-Scholes, which he used to price warrants to great effect. That was in the mid-Sixties and there was a lot of mispricing. There were no exchange traded options until 1973, interestingly when the Black-Scholes paper was published.
     
  4. Samuelson, Paul
    Rational Theory of Warrant Pricing
    Industrial Management Review
    1965

    Among others. Nornal approximation models all.
     
    .sigma likes this.
  5. If I were him I would've kept that model a secret, and just traded mispriced options. Make a lot more that way.
     
    markuzick likes this.