[HN Gopher] How I Helped to Make Fischer Black Wealthier (1996) ...
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       How I Helped to Make Fischer Black Wealthier (1996) [pdf]
        
       Author : antiviral
       Score  : 5 points
       Date   : 2023-06-15 18:24 UTC (4 hours ago)
        
 (HTM) web link (site.warrington.ufl.edu)
 (TXT) w3m dump (site.warrington.ufl.edu)
        
       | antiviral wrote:
       | In the 1970's, Fisher Black (of Black-Scholes fame) spotted an
       | arbitrage opportunity between Value Line futures contracts (an
       | early version of the equal weighted S&P index) and the underlying
       | stocks.
       | 
       | The value Line futures contracts were supposed to track the
       | performance of a basket of stocks represented by the Value Line
       | Index. However, due to an error in the way the market calculated
       | the price of the Value Line futures (which were a geometric
       | index), there was an error in the market pricing.
       | 
       | Black, who at the time was at Goldman Sachs, was one of the first
       | to notice this error, and helped the firm make a ton of money,
       | and this trade helped him become a partner there. This article is
       | from the POV of one of a group of finance professors who were on
       | the other side of the trade, who didn't realize the error until
       | it was too late.
        
       | malshe wrote:
       | Awesome story! The line about believing you are an informed
       | trader when you are really just a noise trader brought back
       | memories of my failed trading endeavors.
        
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       (page generated 2023-06-15 23:02 UTC)