The Trillion Dollar Equation

"I can calculate the motions of heavenly bodies, but not the madness of people" this gotta be one of the hardest quotes.

When a physics channel explains F&O better than any finance channel 🙏🏻

1:00 Just heard about Jim Simons' passing today (10th May 2024). I recalled watching his contribution to hedge funding from this channel about two months ago. I came here to appreciate his contribution once more. RIP Legend!

I love that his answer about whether this helps or not is basically "when things are good it's fine, but when things go bad it makes things much worse". Which...yeah.

You are better at explaining financial economics than most econ/finance channel on youtube

A young economist and an old economist are walking down the street, and the young economist says, "Look! A $20 bill!". The old economist says, "Nonsense. If there were a $20 bill just laying on the ground, someone would have picked it up already."

It's worth mentioning that Merton and Scholes, who were champions of the efficient market hypothesis, were part of the board of directors of a hedge fund called Long-Term Capital, which ironically sought to exploit market inefficiencies to make money. The fund ended up collapsing less than 4 years later and receiving a huge bailout. In the years before, Ed Thorp's fund was making record profits until it was dismantled by the US gov. Source: Fortune's Formula, very interesting read

Unfortunately, Prof. Jim Simons passed away today (May 10, 2024). As a graduate student in math department of Stony Brook University, I came to know this earlier. He's genius of a person. Rest in peace, rest in knowledge. I always wanted to meet him but the nature has other plans. Om Shanti.

It's so fascinating to see the dots being connected from finance to math to a physics breakthrough, science is beautiful

I don't think that there is any other channel that brings such kind of interesting technical content in such lucid terms.

Unless I missed it, they didn't mention LTCM (Long Term Capital Management). It was a multi-billion dollar investment firm founded in 1994 by two Nobel laureates using the Black-Scholles model -- and it went bankrupt in 1998.

you have such a gift to explain these things. Your video on Fourier transformation helped me immensely in my PhD dissertation actually (i still had to find "legit" sources cause a veritasium video doesn't count, but I understood it better from you than from any "proper" papers). Please never stop making these, you explain complicated things so well

The style of this video is brilliant. It reminds me of a film where there are multiple plot lines and these seemingly unrelated subplots satisfyingly come together at the end.

I've never fully grasped how options worked until now, I swear other people go out of their way to make it appear more complicated than it really is.

One of the best descriptions of options I’ve ever heard, the olive press is so easy to understand

This is such a beautifully intricate breakdown of the Black Scholes model and Derivative pricing. I have an exam in a few weeks that includes 6 chapters on the mathematics and economics of derivatives so thank you for this video. Talk about right on time!

"What did Simons get right that Newton got wrong? For one thing Simons was able to stand on the shoulders of giants." Masterpiece.

As a pure math undergrad turned math teacher turned stats masters turned actuary... just wow. I had a smile across my face throughout as you connected the dots across the history of this topic. Fantastic as usual

I did a PhD in it (2008 - 2012 at the University of Sydney). Black and Scholes got the maths wrong by holding the portfolio flux fixed flat at r, debasing it of market return mu with a surreptitious slack variable (from the constraint on the portfolio returns). This means that the formula is systematically inaccurate in that it underprices calls (upside) and overprices puts (downside). The need for implied volatility is the (inadvertent) admission that the formula is wrong (because it does not contain mu). The binomial model perpetuated this nonsense of not having market return mu in option premiums by removing the flux by changing p (also by debasing the portfolio flux). Apparently someone forgot to check the risk and return properties of that model (noting that binomial variables are already under-dispersed and financial markets are intrinsically over-dispersed). Not having mu in option premiums is essentially financial communism.

Obviously none of them heard of Nanci Pelosi