305
A
Absolute dollar value of returns, 
172–173
Accuracy, confidence vs., 119–121
Acquisitions (see Mergers and 
acquisitions)
Activist investors, 110
Against the Gods (Peter Bernstein), 9
Agents:
buy-side, 132–136
defined, 131
investment strategies of, 137–138
principals vs., 131–132
sell-side, 136–137
AIG, 301n1
Allocation:
and leverage in portfolios,  
174–183
and liquidity risk, 256
and portfolio management with 
short-call spreads, 228–229
Alpha, 134
American-style options, 296n2 
(Chapter 1)
Analysis paralysis, 120
Anchoring, 60, 97
Announcements:
and creating BSM cones, 156, 157
market conditions following, 68–69, 
72–73
tenor and trading in expectation  
of, 192
AOL, 103
Apple Computer, 101, 250–251,  
297–298n3
Arbitrage:
defined, 288–289
dividend, 223, 288–293
Ask price, 147
Asset allocation, liquidity risk  
and, 256
Assets:
defined, 78–79
fungible, 272–273
in golden rule of valuation, 77
hidden, 110, 111
idiosyncratic, 272
interchangeable, 272–273
mispriced, 274–277
operating, 110
price vs. value of, 79–80
underlying, 33–34, 272–273
Assets under management (AUM), 132
Assignment:
with covered calls, 247–248
defined, 222–223
Assumptions:
BSM model, 32–33, 40–47, 78, 150
dividend yield, 67
with forward volatility number, 
156–157
time-to-expiration, 64–67
volatility, 60–64
At-the-money (ATM) options:
BSM cone for, 53
collars, 259
covered calls, 242–243, 245, 246
defined, 13, 16, 17
long calls, 189
long diagonals, 235–237
Index