"riskarb" <null@[EMAIL PROTECTED]
> wrote in message
news:Z69Sb.5793$BA2.3171@[EMAIL PROTECTED]
>
> "Jefferson N. Glapski" <jeffersonWEARE@[EMAIL PROTECTED]
> wrote in
> message
> >
> > 3. You ignore the fact that put call parity is model independent. That
is
> to
> > say, put call parity holds regardless of any option model. Implied
vols,
> > OTOH, do not exist without the presence of an option pricing model.
>
> *** Right, but put/call parity doesn't backsolve for implied volty, and
> we're referring to an impled volty differential here... By all means,
> continue to trade based upon p/c parity w/o inputs for carry, divs,
exercise
> conventions.
>
>
> > 4. You ignore things like transactions costs, the absence of risk free
> > rates, the fact that lognormal probability distributions aren't
usually
> > realized and the fact that volatility is not constant.
>
> *** Transactions costs -- negative edge, marking down your ficticious
> arbitrage proceeds, unless you get paid to trade this *magical* implied
> variance.
Marking down? Try eliminating them.
> *** The distribution curve can be anything you like it to be... norm.,
> lognorm, fat tails, leptokurtic, etc... this has ZERO impact on the
> arb-equivalence.
An assumption of B/S is what? Where do the vol quotes come from?
> *** Constant volty, immaterial as well.
Where do you think the quotes on vols come from? A model that assumes
constant volatility.
--
Jefferson N. Glapski
http://www.glapski.com
They put on college football's most distinctive uniforms, thinking about
those before them. The walk-ons, the All-Americans, the Legends who made
sure to uphold the tradition... They are the black shoes, white helmets
and
plain uniforms of one of America's most successful programs. They are
heroes, they are winners....they are Penn State football.
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