Asymmetric Finance

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Asymmetric Finance
How To Get A 32,000% Return During Extreme Market Situations
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How To Get A 32,000% Return During Extreme Market Situations

The market is full of inefficiencies and ‘black swans’ from which you can get stratospheric returns

Jun 28, 2021
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Asymmetric Finance
How To Get A 32,000% Return During Extreme Market Situations
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By Charlybron on Unsplash

During 1950 several economists laid the foundations of the Modern Portfolio Theory, one of the most important was Black-Scholes (BS), whose formula served as a reference for the valuation of options for a long period of time, in fact, today it continues to study and use in academia. This formula tried to include the price of financial options under a normal distribution. What Black-Scholes did not take into account is that in the world of finance there are extreme situations that go beyond said distribution, as was the case of Covid-19.

This strange event is found within the tails of the distribution (> 5 sigmas), which means that following the BS assessment, the probability that an event of this type will happen is 0.0014 events every 10 years when it has been proven that in the world of finance 7 occur every 10 years. We should be covered in these types of situations.

For this specific case, we are going to see what would happen if a person had covered their p…

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