Vol. 22, No. 4, 2024 By Moshe Levy and Richard Roll (Reviewed by Ming Xian) View PDF… Read more
Fourth Quarter (2024)
Arbitrage Pricing Theory 50 Years After Black Merton Scholes
Vol. 22, No. 4, 2024 Robert A. Jarrow In the past 50 years, the Black Merton Scholes option pricing methodology has advanced in three directions: the mathematical foundations, modifying its assumptions, and applications to new derivatives. This lecture reviews the advances with respect to the mathematical foundations and the modifications of its assumptions. The key… Read more
Fooled by the Black Swan
Vol. 22, No. 4, 2024 Sanjay K. Nawalkha This paper offers a critical analysis of the normative theory of investment decisions as presented in Taleb’s The Black Swan. I find that the relentless pursuit of positive black swans can lead investors to overprice opportunities, potentially triggering financial bubbles and crashes in the medium to long… Read more
Training Machines to Trade Stocks
Vol. 22, No. 4, 2024 Dilip B. Madan and King Wang Machines are trained to trade stocks by developing an investment policy for stock investment in a Markovian context. Importantly, the investment actions impact just the immediate reward and not the state transitions. The policies are designed to maximize a nonlinear expectation of the undiscounted… Read more
Hedging Barrier Options Using Reinforcement Learning
Vol. 22, No. 4, 2024 Jacky Chen, Yu Fu, John Hull, Zissis Poulos, Zeyu Wang and Jun Yuan We examine the use of reinforcement learning (RL) to hedge barrier options. We find that, when the hedger’s objective is to minimize value at risk or conditional value at risk, RL is an attractive alternative to traditional… Read more
Black–Merton–Scholes Option Pricing: A 50-Year Celebration—Looking Ahead
Vol. 22, No. 4, 2024 George M. Constantinides It is a great honor to be invited to participate and contribute to the 50-year celebration of the path breaking option pricing theory of Fischer Black, Robert Merton, and Myron Scholes (Black and Scholes (1973) and Merton (1973)). My focus is on financial intermediation and looking ahead… Read more
Keynote Address by Nobel Laureate Myron S. Scholes Fall 2023 UMass Amherst CISDM Conference on: Black–Merton–Scholes Option Pricing: A 50-year Celebration and Looking Ahead
Vol. 22, No. 4, 2024 Myron S. Scholes View PDF… Read more
Introduction
Vol. 22, No. 4, 2024 Douglas Breeden, John Hull and Sanjay Nawalkha We are delighted to present the second special issue of the Journal of Investment Management, commemorating the 50th anniversary of the revolutionary Black-Merton-Scholes (BMS) option pricing model. This edition builds upon the themes of our first special issue, which featured Robert Merton’s keynote… Read more