{"product_id":"capital-ideas-and-market-realities-option-replication-investor-behavior-and-stock-market-crashes-9780631215547","title":"Capital Ideas and Market Realities: Option Replication  Investor Behavior  and Stock Market Crashes","description":"\u003cp\u003eIn Capital Ideas and Market Realities  Bruce Jacobs sifts through the history of modern finance  from the efficient market hypothesis to behavioral psychology and chaos theory  to determine the cause of recent market crashes. He finds that some investment strategies  especially those based on theories that ignore the human element  tend to self-destruct  and can take markets down with them. Ironically  it is often those strategies that purport to reduce the risk of investing that can pose the greatest danger. Of particular concern are trading strategies based on the Nobel Prize-winning option pricing model. This model gave rise to option replication  a technique for synthesizing the payoffs to an option by trading between the underlying asset and cash. Replication requires selling as stock prices decline and buying as stock prices rise. When enough money follows this type of trend-following \"dynamic hedging \" bubbles and crashes can result. In 1987  trading related to an option replication strategy known as \"portfolio insurance\" led to the largest crash in U.S. market history. Today  similarly mechanistic trading underlies trillions of dollars in exchange-traded and over-the-counter options and swaps  as well as myriad institutional and retail products designed to provide investors with excess returns at low or no risk. Capital Ideas and Market Realities uncovers the risks these strategies pose for market stability and investor wealth. The book has also become a lightning rod in the debate over the need for better investment product risk disclosure.\u003c\/p\u003e","brand":"My Store","offers":[{"title":"Default Title","offer_id":45651721093173,"sku":"ByrdShop_0631215549","price":388.16,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0627\/8139\/0901\/files\/9780631215547.jpg?v=1781838284","url":"https:\/\/atxbooks.com\/products\/capital-ideas-and-market-realities-option-replication-investor-behavior-and-stock-market-crashes-9780631215547","provider":"ATX Books","version":"1.0","type":"link"}