Utilization of this idea caused the collapse of the John Meriwether-helmed firm Long-Term Capital Management, which employed two of its formulators on its board of directors; its failure was helped by the assumption of efficient markets in this idea.
Utilization of this idea caused the collapse of the John Meriwether-helmed firm Long-Term Capital Management, which employed two of its formulators on its board of directors; its failure was helped by the assumption of efficient markets in this idea. This hypothesis uses geometric Brownian motion as its basis, and in practice employs GBM as a means of charting variances in market prices over a given period. The deregulation of the derivatives market allowed for the application of this model in the stock market, as it removed the need for a stock to pay a dividend, another assumption of this model. Used by hedge funds that bet long and short on the derivative of the same stock, for 10 points, name this economic model that allows traders to profit as the two positions move toward an equilibrium state, developed in part by Robert Merton.
Utilization of this idea caused the collapse of the John Meriwether-helmed firm Long-Term Capital Management, which employed two of its formulators on its board of directors; its failure was helped by the assumption of efficient markets in this idea.
{Black}-{Scholes} model