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#1
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Re: World Economy v. Poker??? Zero-Sum????
Correct me if 'm wrong, but I think an option has an expected return that equals to the risk free interest rate in the Black-Scholes world, becasue everything has to be discounted. But even if it's true I have no idea if this applies in the real world.
PS: I haven't been drinking when I made the original post, but I've been drinking now. The restaurants have some good wine selection here in Montreal. [img]/images/graemlins/smile.gif[/img] |
#2
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Re: World Economy v. Poker??? Zero-Sum????
Never mind. I think becasue the option is already discounted, if you are long it has an expected return equal to the interest rate, but the person on the other side of the trade loses an expected amount equal to the interest rate. So yes it is zero sum (without transaction costs).
I was also thinking of the delta neutral portfolio. |
#3
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Re: World Economy v. Poker??? Zero-Sum????
Just for the record... options are risky... don't want anyone thinking they can buy options and get a risk free return!! [img]/images/graemlins/smile.gif[/img]
There are also option strategies that mitigate some of the risk. |
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