Monday, November 06, 2006

Quote of the Week

"Implied volatility is based on historical volatility, but who cares about historicals? They're irrelevant. The point is, things can happen for the first time that aren't in your distribution so they can't be priced. If it's never happened before, how can you hedge yourself? The only way to hedge the unknown is to cut off tail risk completely." -- Jim Leitner from the interview in Inside the House of Money


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