31 lines
1.8 KiB
Plaintext
31 lines
1.8 KiB
Plaintext
300 • N o t e s
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4. The original academic paper discussing prospect theory was published
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in Econometrica, Volume 47, Number 2, in March 1979 under the title:
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“Prospect Theory: An Analysis of Decision Under Risk. ”
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5. Over the years, the paradigm for broker-dealers has changed, so some
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of what is written here is a bit dated. Broker-dealers have one part of
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its business dedicated to increasing customer “flow” as is described
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here. Over the last 20 years or so, however, they have additionally
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begun to capitalize what amounts to in-house hedge funds, called
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“proprietary trading desks” or “prop traders. ” While the prop traders
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are working on behalf of corporations that were historically known as
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broker-dealers (e.g., Goldman Sachs, Morgan Stanley), they are in fact
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buy-side institutions. In the interest of clarity in this chapter, I treat
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broker-dealers as purely sell-side entities even though they in fact have
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elements of both buy- and sell-sides.
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Chapter 7
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1. Round-tripping means buying a security and selling it later.
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2. This bit of shorthand just means a bid volatility of 22.0 and an ask
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volatility of 22.5.
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Chapter 8
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1. This is one of the reasons why I called delta the most useful of the
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Greeks.
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2. When I pulled these data, I pulled the 189-day options, so my chance
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of this stock hitting that high a price in this short time period is slim,
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but the point I am making here about percentage versus absolute re-
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turns still holds true.
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3. A tool to calculate all the downside and upside leverage figures shown
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in this chapter is available on the intelligent option investor website.
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4. “Buffett’s Alpha, ” Andrea Frazzini, David Kabiller, and Lasse H. Ped-
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ersen, 2012, National Bureau of Economic Research, NBER Working
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Paper No. 19681. |