yo peeps, here's an edgy post for u. see my post for the boring phrasing.So yo, can you even analyze the price of an option if I give you perfect information about the future and behavior of all participants, with easy, big, round, numbers and perfect information?Let's see.we simplify by making a big research company that has all its eggs in one basket, and a single stochastic event to occur next year. it's just made a baldness pill but either it cures badness perfectly with 1 dose and no side effects or it has 0 effect, and a study is being done and we're about to find out.The event is that in 365 days the results of a study result will be in, and either the company is worthless (worth $0) because it has all its eggs in one basket which just got crushed or worth $100 billion immediately upon that announcement, which won't be leaked. (just accept this stochastic condition please.) Each outcome has a 50% chance of happening. We simplify all other conditions. Everyone knows and agrees on this. Nobody knows or can guess the result.So ignoring a bit of time value, due to the efficient market the current trading price is $50 billion, since it perfectly factors in the single stochastic event - i.e. due to 50% chance of being worth $0 and 50% chance of being worth $100 billion, it is therefore wQorth $50 billion.so peeps, how much should a call option for 1 year and a few days at a strike price of $75 billion cap be worth?can u even calculate? Find out by reading posters who know what the f they're doing.What is the price of the option today under a perfect market system? post your answer and find out if ur braindead or 200 IQ. of course this one isn't 50/50 ;)
No comments:
Post a Comment