52:19 he nearly gets it right. he forgets to add the coefficient bRR, which adjusts the expected value of calls by the amount of jPOWs printer activity
All these haters saying this guy doesnt really understand practical finance - he was CEO of Harvard’s endowment and paid nearly $16M in 2015. I think the guy is a legit mathematician and practitioner of finance
He's legit. I actually can follow what he says and his math. He just throws terms like zero coupon bonds and martingales which the common person may not know
Yeah...What I'm getting is that they're frustrated cause they don't know what he's talking about. There's a reason this is lecture 20 in the video lecture series LMAO
Each step of the explanation, each formula has a huge importance in the theory of asset pricing. Excellent content. Best finance course I ever watched in my entire life, and I thought I had good teachers at my university.
I have no idea what he’s talking about, not because of the math (though I am rusty, admittedly), as I’m a math minor, but the finance understanding you need is pretty substantial. So yeah I think you’re full of shit.
Wow I can’t believe how humble he is given that he didn’t even tell his class about himself when he was telling them about the top wranglers in different years
so, he was being coy when he gave the vague '198x' year, challenging people to guess who was #3, etc. Then, makes mention of the #3 wrangler becoming more noteworthy the #1s and #2s. Is he hinting that he's worked out something that will fundamentally change how assets are priced/discounted, or something of similar scope and magnitude?
God bless the only professor in this course that actually uses the black board and not purely bullshitting without formula or explanation and being annoying as fuck. Will check out his book.
Shitty university in my third world country is also equally equipped and teaching the same things. Difference is, the students who attend MIT are intellectually elite, meanwhile students in my university are idiots.
Really interesting how the cancellation of the SSC contributed to the rise of quant finance. The discussion about wranglers was pretty cool, one he didn't mention was the 1973 Senior Wrangler: Lee Hsien Loong, current prime minister of Singapore. Of course the lecture was great too.
Price and probability are both related to one another. Price of a product is influenced from cost of product, which is influenced from human labor and the machines made by human beings for means, modes and mediums of invention to innovation, designing to development, production to manufacturing, quality controll and research and development quantitatively and qualitatively.
Hey, I found this second video of the same Prof with another new guest instructor. Great to sit in this class again with different topic. And will collect this lecture into my YT library. Hahaha
ya he spent 3 years on this book but yet he did not include the solutions to the chapter questions in the book... how can i learn when i don't know where i messed up.
Does the application of this theory have any benefit tor economy as a whole ? Or does it only enable some investors to make money from other investors ?
Regardless how intelligent this presser is, tests shouldn't be designed to the point of difficulty, "just incase you want to look in further." Buddy thats why we review the test
Unless you're working for Renaissance Technologies you shouldn't be fucking around with options. Their entire business model is essentially taking all the money of individual speculators through mathematical superiority.
Lambda == lamb duh(easy button) == the lamb slain before the foundation of the world. St == the snake on the cross integrating mankind back in. Derivative == derive == de river == off river == from riven
Awsome analysis please show us using automated tools at the same time. I'd love to to see this in realtime with an automated analysis as well. multi-task
What can be done with this in practice? Is this useful for option pricers to put a value on the option if they can estimate where the stock will be? Or would investors want to approximate where the stock could be, and then estimate the option price, and see if there are “discounts” if a firm is charging less than the investor would expect? If we estimate the stock price density using all the call option prices, somehow find a derivative with respect to k, is the density for stock price actually reasonable?
At ruclips.net/video/eG_aRPy1KVE/видео.html What does taking lambda to inf means ? why does taking it to inf, is same as dC/dK ? I understand 1/lambda will become 0, but whats happens to lambdas in numerator as multipliers ?
Is there a reference to the fact mentioned in the "Duality" lecture, namely, that since 2008 there can be options, whose prices diverge from the replicating portfolio?
I think it rather has to do with the way he built the lecture, to go from option pricing to probabilities in the first half and from probabilities to option pricing in the second half.
Please EXPLAIN the mathematical formula on your P&L statement for MIT's $27 BILLION endowment of Zero tax liability as a private institution. Also, if your kind enough to explain or the formula for your distribution of funds on your endowment. Thanks.
We are basically striking his ball sake. Nice book I’ll read after knowing that math can make you rich. And if you know you are right. Place a call. And if you know they are wrong. Place a put. Horse racing. You cannot replicate this at the rate of the real world trade. That being said. Knowing how it works make you understand imbalances.
What he doesn’t tell you is the probability of the event changes based on what options and how much have been purchased. So, if everyone buys calls the market will go down with 100% probability. If 50/50 calls puts,the market will stay flat and theta will just rot you options away. Always remember people the stock market is a rigged against you as an investor. They can see your trades, they know what you’re holding and they know the probability of what you’ll do next. Basically, you are playing cards with your cards showing and their cards hidden, and they can draw from the deck as they wish. It’s a lose/lose. I always say, the best time to sell an option is 5 minutes after you buy it. That is, until they identify you as a scalper. Once they’ve seen you trade the computer has already built models on you - use multiple accounts and don’t make the same trades or you’ve already lost
I disagree with the causal attribution regarding the development of the quant field due to physicists being out of work. The Renaissance (or Medallion) fund had been around for a long while before then. It was inevitable regardless.
Medallion fund was founded in 1988. Defunding of the super hadron collider happened in 1983. It was inevitable, yes, but it definitely expedited the quant field.
Digital clipping on voice is so infuriating to listen to. Harsh noise all over the spectrum. Analog amps go into compression and everything is relatively well behaved and low pass, but digital is totally unforgiving if your gain is too high. This is the audio equivalent to blowout in photography.
Hi, Thanks a lot for wonderful lecture. I have one question though. While you prove Digital option is derivative of call price with respect to K, do you mean, - lambda call options with strike price K+(1/lambda) equal to sell lambda call options?
Thats correct. Another noteworthy point is that the slope between the two strike prices equals the number of calls purchased. As we let lambda tend towards infinity, the strike price of the calls being sold and bought will converge while the payoff slope tends towards becoming vertical. In essence, that's how we end up with the digital option simply jumping at the strike price.
We are probably underestimating the great times we are living in. I am basically taking an MIT class for free while sitting on my couch.
Internet is revolutionary
I have had a couple of beers
Yeah, for personal growth, that’s great. But no one cares if you don’t have your diploma from the brick and mortar MIT.
While I hit my bong lol crazy times we live in
Doing the same
Some notable Timestamps:
0:04:47 Introduction
0:11:36 Option--Probability Duality
0:49:38 Fundamental Theorem of Asset Pricing (FTAP)
💯💯💯
BLESS YOU.
Thanks
@@klam77 the to
52:19 he nearly gets it right. he forgets to add the coefficient bRR, which adjusts the expected value of calls by the amount of jPOWs printer activity
All these haters saying this guy doesnt really understand practical finance - he was CEO of Harvard’s endowment and paid nearly $16M in 2015. I think the guy is a legit mathematician and practitioner of finance
He seems legit to me
He's legit. I actually can follow what he says and his math. He just throws terms like zero coupon bonds and martingales which the common person may not know
Richard Chua? Is the same Richard Chua who has been teaching wonderful courses on LinkedIn Learning?
Yeah...What I'm getting is that they're frustrated cause they don't know what he's talking about. There's a reason this is lecture 20 in the video lecture series LMAO
Oh yeah…. my friend met Cesar Romero… so there 😂
Each step of the explanation, each formula has a huge importance in the theory of asset pricing. Excellent content. Best finance course I ever watched in my entire life, and I thought I had good teachers at my university.
The class seemed lost though...
Great lecture, particularly if you are trained in probability
Same a lot of these MIT lectures are brilliant
This is a math class though
You can kiss my asset…..lol sorry I had to be immature
Somehow followed this despite no financial background. An enthusiastic lecturer makes a huge difference
@Tetrachloro Mysticide Considering the topic and how its presented a foundation in mathmatics let you go further then finance.
Lol k
I have no idea what he’s talking about, not because of the math (though I am rusty, admittedly), as I’m a math minor, but the finance understanding you need is pretty substantial. So yeah I think you’re full of shit.
fat chance
Such a clear exposition, with completely new angles for me on a familiar topic. Brilliant.
Lies again? Platinum Debit
I am the dumbest guy in the entire room. We are halfway I still don’t have a clue what is going on.
Amazing lecture! And, for the record, he was third wrangler of his Cambridge class back in 1985.
Wat is that
It means he wears cheap Wrangler Dad Jeans.
He was Third Wrangler in 1988.
Wow I can’t believe how humble he is given that he didn’t even tell his class about himself when he was telling them about the top wranglers in different years
so, he was being coy when he gave the vague '198x' year, challenging people to guess who was #3, etc. Then, makes mention of the #3 wrangler becoming more noteworthy the #1s and #2s. Is he hinting that he's worked out something that will fundamentally change how assets are priced/discounted, or something of similar scope and magnitude?
God bless the only professor in this course that actually uses the black board and not purely bullshitting without formula or explanation and being annoying as fuck. Will check out his book.
Best lecture I have seen on Options pricing. I enjoyed this very much
What an exciting professor, bravo.
Thanks for sharing this information MIT. People don’t have no excuse now a days. If you have a desire to learn imagine where it can take you ….
excellent introductory treatment of a topic which is usually mired in infernal stochastic calculus.
He himself is a third wrangler of his Cambridge class
Got baked and now paranoid that there is a pop quiz on this 😱 thanks for the content!
I found it comforting that my state university classes are as equally equipped.
lol
Shitty university in my third world country is also equally equipped and teaching the same things. Difference is, the students who attend MIT are intellectually elite, meanwhile students in my university are idiots.
@@patrickthepure to be fair, third world countries doesn't have this as a priority.
Very interesting lecture, although I only understood 20% of it.
Try imagining the concepts.
Its normal for that kind of lecture
@Newtube i see
😂
Will go climax if 100%
Best Pedagogical Skills And Talented Instructor
The Gordon Ramsey of finance
just saw ur comment, I commented the same thing 30 seconds ago. IKR
@@c4lb333 no one can tell me about the hadron collider?! these students are f’ing raw!! GTFO!!
@@Kinnoshachi "idiot sandwiches, all of them"
ramsAy, not ramsey
@@skuzza405 for F**K sake, I'm fired
As important of a class as you’ll find in academic finance
What ?
I enjoyed the side story about wranglers.
This is a fantastic lecture. Also got suckered into buying the book.. wonderful read, too!
Is there anything I can use in my options trading?
You didn't get suckered. You were just enamored by his charm.
Can't believe 18.S096 is an undergraduate course. There are so many wisdoms in this course.
Why should undergraduate courses not be full of wisdom?
Don't judge a book by its cover.
Really enjoyed Stephen Blythe's lecturing! Amazing lectures thanks for sharing these
Teacher seems like a bloody legend
Really interesting how the cancellation of the SSC contributed to the rise of quant finance. The discussion about wranglers was pretty cool, one he didn't mention was the 1973 Senior Wrangler: Lee Hsien Loong, current prime minister of Singapore. Of course the lecture was great too.
Excellent course, this is the essence of asset pricing
I know I was not gonna understand a thing when I clicked this but still watched it and didnt unerstand anything LOL
The project was expected in a very professional manner
This lecturer must be making millions on the trading floor because he understands all the formulae that go into the AI algs running the stock market.
Nope. Probability is everybody's dilemma.
sorry, all the real money is made by frontrunning suckers. the math aint shite
facts @@loupasternak
What's the meaning of -lambda calls at strike k+1/lambda. negative amount of contracts ? 17:20
Yes. Long lambda calls at strike K and short lambda calls at strike K+1/lambda.
interesting... *pulls up robinhood and buys 100 call options expiring this week*
Price and probability are both related to one another. Price of a product is influenced from cost of product, which is influenced from human labor and the machines made by human beings for means, modes and mediums of invention to innovation, designing to development, production to manufacturing, quality controll and research and development quantitatively and qualitatively.
Will buy his book to digest all points. They are still available on Ebay and Amazon in 2021.
name of th book ?
What’s the book
Whats the name of the guy
Hey, I found this second video of the same Prof with another new guest instructor. Great to sit in this class again with different topic. And will collect this lecture into my YT library. Hahaha
Hey, where's this second video?
Fantastic, I never thought call butterfly as approximation of pdf of underlying asset
ya he spent 3 years on this book but yet he did not include the solutions to the chapter questions in the book... how can i learn when i don't know where i messed up.
It blows my mind that I did this stuff in college. Now it’s like gibberish.
I think if Professor Blythe gets really famous Steve Martin would have an easy job playing him in a movie. Or the other way around.
Stephen Blythe is awesome!
I've never been to college but all of this makes perfect sense
Quite funny being a maths student in the UK, watching a MIT lecturer in the US giving history about Cambridge math in the UK
Does the application of this theory have any benefit tor economy as a whole ? Or does it only enable some investors to make money from other investors ?
Regardless how intelligent this presser is, tests shouldn't be designed to the point of difficulty, "just incase you want to look in further." Buddy thats why we review the test
I feel absolutely enlightened today
I hate it when people explain things that quickly then explain it in such a way that you are supposed to know it
bursting with clarity
If only this helped resurrect my options graveyard. He is so cute
Unless you're working for Renaissance Technologies you shouldn't be fucking around with options. Their entire business model is essentially taking all the money of individual speculators through mathematical superiority.
Thanks for the masterclass, sir. 💯🔥
is 24:19 and 25:29 talking about the same distribution ? namely risk-neutral distribution ?
@ozicrypto G U ok bro
Excellent video…. Professor
11:57 option probability duality
This is good for humanity
0 percent of viewers actually learned and applied anythimg from this playlist
@@deedumeday518not quite
Wow!! So Amazing
So if I understand this correctly..
Buy low, sell high?
Sell your dad
Lambda == lamb duh(easy button) == the lamb slain before the foundation of the world.
St == the snake on the cross integrating mankind back in.
Derivative == derive == de river == off river == from riven
Very nice, very well explained.
😊
I could actually feel a wrinkle start forming at about 23 minutes in.
Lol from stress or from you cranium stretching?
i also bought this book and it's great
Which book?
An Introduction to Quantitative Finance
by Stephen Blyth, the lecturer
Awsome analysis please show us using automated tools at the same time. I'd love to to see this in realtime with an automated analysis as well. multi-task
ill take the animated version 😁
MIT SUPPORTS THE GLOBAL AGENDA!
what a brilliant teacher
So glad I didn't pay for this course...
LOL
Burn
LOL
yes, but will this work on a dice table?
What can be done with this in practice?
Is this useful for option pricers to put a value on the option if they can estimate where the stock will be?
Or would investors want to approximate where the stock could be, and then estimate the option price, and see if there are “discounts” if a firm is charging less than the investor would expect?
If we estimate the stock price density using all the call option prices, somehow find a derivative with respect to k, is the density for stock price actually reasonable?
watch this at 1.5x speed for time saving. 2x if you are brave
"Gambling" by MIT
At ruclips.net/video/eG_aRPy1KVE/видео.html What does taking lambda to inf means ? why does taking it to inf, is same as dC/dK ? I understand 1/lambda will become 0, but whats happens to lambdas in numerator as multipliers ?
dividing by 1/lambda is the same as multiplying by lambda, hence coming back to the common derivative definition
Would have been helpful if you plugged in numbers from a real stock/ Call option to see if any of this actually works
thanks for your contribution...
There's a kid called "MitchRayTA" on youtube who uses this on crypto calls and is always right
What do you mean if any of this works, most brokers determine the bid or ask prices on this math. It’s a given thing
I just heard one thing from the whole thing, whiskey😂😂😂
Excellent lecture.
Is there a reference to the fact mentioned in the "Duality" lecture, namely, that since 2008 there can be options, whose prices diverge from the replicating portfolio?
I think it rather has to do with the way he built the lecture, to go from option pricing to probabilities in the first half and from probabilities to option pricing in the second half.
Maybe it's because US interest rates in the last decade have not been higher than inflation, at times real interest rates turning negative.
@ 1:05:05 shouldn’t the limits in the integral be from 0 to x instead of from 0 to infinity?
I see your point, but it is an equivalent formulation as the integral is about [ max(x-k,0) g"(k) ] and not [(x-k) g"(k)].
So, will the market go up or down?
Nothing says pure math like inventing a notation for something that doesn't exist in real life
I just watched an hour of a smart guy telling me the market is priced in
13:50 time when I no longer could comprehend.
Simply put, duality leads to conflict while neutrality leads to infinite potentialities.
Where did the 1/Z go in the pdf derivation?
No please don’t spread false info, it was just a typo. It was re added later in the lecture
@@joshyman221 thanks!
@@joshyman221 Can you please tell me how he figured the Butterfly Probability
Please EXPLAIN the mathematical formula on your P&L statement for MIT's $27 BILLION endowment of Zero tax liability as a private institution. Also, if your kind enough to explain or the formula for your distribution of funds on your endowment. Thanks.
What is lambda
We are basically striking his ball sake.
Nice book I’ll read after knowing that math can make you rich. And if you know you are right. Place a call. And if you know they are wrong. Place a put.
Horse racing.
You cannot replicate this at the rate of the real world trade.
That being said. Knowing how it works make you understand imbalances.
Functions may interfare with one another, is any function which neutrilze it ?
What he doesn’t tell you is the probability of the event changes based on what options and how much have been purchased. So, if everyone buys calls the market will go down with 100% probability. If 50/50 calls puts,the market will stay flat and theta will just rot you options away. Always remember people the stock market is a rigged against you as an investor. They can see your trades, they know what you’re holding and they know the probability of what you’ll do next. Basically, you are playing cards with your cards showing and their cards hidden, and they can draw from the deck as they wish. It’s a lose/lose. I always say, the best time to sell an option is 5 minutes after you buy it. That is, until they identify you as a scalper. Once they’ve seen you trade the computer has already built models on you - use multiple accounts and don’t make the same trades or you’ve already lost
if this works why is this guy not sitting on his mega yacht
Gordon Ramsay of finance.
this lecture reminds me the movie of alan turing
Please don't move the camera around when the lecturer writes. We have big enough screens to see the words, and we want to see the entire board.
I lost track at “lander” whats lander?
Strike( k+1/lamda ) how it comes....can anyone explain please ....🙏🏻
I watched all of this so I can understand how dumb I am
Something tells me you still don't know how dumb you are.
I disagree with the causal attribution regarding the development of the quant field due to physicists being out of work. The Renaissance (or Medallion) fund had been around for a long while before then. It was inevitable regardless.
Medallion fund was founded in 1988. Defunding of the super hadron collider happened in 1983.
It was inevitable, yes, but it definitely expedited the quant field.
I didn't realize 2009 caused that. Wow. That makes a LOT of sense
How & when does this get incorporated into the practice of trading?
Ok actually that intro question resonates with what Emanuel Derman mentioned in his book.
Imagine watching this and expecting to gain anything from this
you need an imagination just to realize its useless
Digital clipping on voice is so infuriating to listen to. Harsh noise all over the spectrum.
Analog amps go into compression and everything is relatively well behaved and low pass, but digital is totally unforgiving if your gain is too high. This is the audio equivalent to blowout in photography.
Hi,
Thanks a lot for wonderful lecture. I have one question though. While you prove Digital option is derivative of call price with respect to K, do you mean, - lambda call options with strike price K+(1/lambda) equal to sell lambda call options?
Thats correct. Another noteworthy point is that the slope between the two strike prices equals the number of calls purchased. As we let lambda tend towards infinity, the strike price of the calls being sold and bought will converge while the payoff slope tends towards becoming vertical. In essence, that's how we end up with the digital option simply jumping at the strike price.
When the S&P algo pops wide cuz of this little spider it's gonna eat ALL the flies
Yes, we love problems that are unsolvable - barring Divine Intervention
all that talent goes to finances to make the already very rich richer
Financial engineering market manipulation what’s the difference?