The End of Risk? Black Scholes

Great documentary on Black Scholes, the mathematical model that suggested that risk could be eliminated from a portfolio of investments and options.

 

When implemented by Long Term Capital Management this model began by producing a large volume of small gains, leading to huge returns.  But then, when confronted by large and unexpected real world events, the model collapsed.  It is my belief that Black Scholes enables a form of gambling similar to the double-down strategy, or Martingale.

http://en.wikipedia.org/wiki/Martingale_(betting_system)

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