Economics, Econometrics and Finance
4 years ago

Options revolution sparks market instability, wreaking havoc on investors' portfolios.

1 view
SSRN Electronic Journal
Option Pricing Theory And Its Unintended Consequences
Bruce I. Jacobs

Paper Summary

The options revolution led to unintended consequences, causing market instability due to option sellers' hedging strategies. Dynamic hedging rules of buying as prices rise and selling as they fall have disrupted markets in the past and are likely to do so again in the future.

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