central banks, the real cost of equity meets game theory
DESCRIPTION
Bottom line, the market clearing "nominal price of risky assets" may appear to be propelled by a positive "value" this ? has in my equation ("Greenspan Puts", etc.) with a premise resting on the greater fool theory or some other simplified and perhaps insightful closed-form logic. YET DISMISSING THE CONCEPT OF THE VOLATILITY - DURING SWINGS IN MARKET PERCEPTIONS THAT THIS PUT'S PERCEIVED VALUE IS VIEWED BASED ON THIS OPTION'S "VEGA" (WHICH IS NOT A GREEK LETTER BUT IS A GREEK) VALUE BASED ON THE TIME AND PERCEIVED VOLATILITY OF THE ASSET DURING THE TIME HORIZON THE RISK PREMIUM CHANGES, PARTICULARLY WHEN THE rf TERM STRUCTURE IS CONSISTENTLY FLAT, GLOBAL MARKETS CRAWL HIGHER, THE rf BECOMES BOTH NOMINALLY AND IN REAL TERMS NEGATIVE, THE RELATIVE COST OF DOWNSIDE PROTECTION vs. UPSIDE EXPOSURE (skew), THE TERM STRUCTURE OF VOLATILITY AND REALIZED CORRELATIONS WITHIN EQUITY MARKETS AND ACROSS NATIONAL AND SECTOR AND STYLE AND OTHER INDICES.TRANSCRIPT
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