As always, I am playing with fire when I critique Warren Buffett, but he does indulge in hyperbole (I hope that is all it is..) when he strays from his preferred habitat. In fact, my previous post on him evoked some strong responses. In the last Berkshire Hathaway report, he is quoted as saying “Both Charlie and I believe that Black-Scholes produces wildly inappropriate values when applied to long-dated options… Academics’ current practice of teaching Black-Scholes as revealed truth needs re-examination. For that matter, so does the academic’s inclination to dwell on the valuation of options. You can be highly successful as an investor without having the slightest ability to value an option”.
Buffett and Black-Scholes
Buffett and Black-Scholes
Buffett and Black-Scholes
As always, I am playing with fire when I critique Warren Buffett, but he does indulge in hyperbole (I hope that is all it is..) when he strays from his preferred habitat. In fact, my previous post on him evoked some strong responses. In the last Berkshire Hathaway report, he is quoted as saying “Both Charlie and I believe that Black-Scholes produces wildly inappropriate values when applied to long-dated options… Academics’ current practice of teaching Black-Scholes as revealed truth needs re-examination. For that matter, so does the academic’s inclination to dwell on the valuation of options. You can be highly successful as an investor without having the slightest ability to value an option”.