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Apologies Mike, I wasn't clear... ;)
Of course we've got Black/Scholes etc. I was opening the discussion up to
measures other than classical that take into account the non-gaussian tails
of market distribution.
Unless we assume that in the case of LTCM the formulas were stable... but
the "margin" wasn't... ;~)
Gene Pope
----- Original Message -----
From: "MikeSuesserott" <MikeSuesserott@xxxxxxxxxxx>
To: "Gene Pope" <gene@xxxxxxxxxxxxx>; <omega-list@xxxxxxxxxx>
Sent: Monday, December 03, 2001 8:31 AM
Subject: puzzling probability and roulette a la Mark Brown
> Gene,
>
> there is a measure which allows you to bet on reversion of amplitude over
> time; it is called "volatility". Frequently used by option traders.
>
> In fact, the mean reversion tendency of volatility is what makes many
> spreading strategies feasible in the first place.
>
> Best regards,
>
> Michael Suesserott
>
>
> -----Ursprüngliche Nachricht-----
> Von: Gene Pope [mailto:gene@xxxxxxxxxxxxx]
> Gesendet: Monday, December 03, 2001 04:34
> An: omega-list@xxxxxxxxxx
> Betreff: Re: puzzling probability and roulette a la Mark Brown
>
>
> We know that flipping a coin will create a "tendency" over time to revert
to
> a mean.
>
> We know that the stock market can "overshoot" more than flipping a coin
> before the same reversion over the same time.
>
> My question is... what is the "factor", probability or otherwise, that
> allows one to "bet" on this reversion over time and how is it measured?
>
> Please correct me if wrong, but is this not what Mark's system is about?
Not
> the odds of the "next" flip, but the tendency of the flips, once skewed to
> one side, to revert?
>
> Best regards,
>
> Gene Pope
>
>
>
>
>
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