Discussion about this post

User's avatar
Overcoming Bias Commenter's avatar

Inferring the probability of the world ending from your option price is not nearly as simple as you make it out to be. The underlying asset of your option is *not* the world ending, but rather the world ending plus a lot of other stuff. Maybe you can account for some of the other stuff, but if you don't have a complete asset structure (and you almost surely do not), then you're going to have a biased estimate of the probability of the world ending.

Expand full comment
Overcoming Bias Commenter's avatar

What I described was simply an option. Do you not think option prices give information about underlying assets?

Expand full comment
15 more comments...