Can Expert Choice Comparion improve on the Black Sholes Options Pricing Model?
Take the Tesla Test Drive to help find out!
Ernest Forman, DSc., Professor of Decision Sciences at The George Washington University, is studying to determine if the combination of decision science and crowd sourcing can outperform the Black-Scholes approach for pricing stock options.
According to Dr. Forman, “The Black-Scholes approach makes some assumptions that are not necessarily reasonable, especially for the longer term — such as trading LEAP options. I think we can use ‘wisdom of the crowds’ as a new, better way to derive probability distributions for stocks as an alternative to the Black-Scholes approach.”
To test his theory, Dr. Forman leverages crowdsourcing to compute a probability distribution using the principle right eigenvector, which is proven effective in deriving priorities and likelihoods from data and/or judgments. He created a crowdsourcing model for Tesla, where participants may answer the question:
“What do you think the price of Tesla stock will be in January 2018?”
…using a short survey that includes a series of pairwise comparisons. Participants can see their own judgments and the combined judgments of the crowd, then review results for expected values and simulations of various buy/sell stock or stock options for Tesla.
Want to test drive the model yourself?– Click here