Intrinsic time for a new take on risk analysis

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A fresh perspective on the risk-reward payoff that drives financial markets can be gained by abandoning the traditional concept of time in financial models, says Emanuel Derman, New York-based managing director in the firm-wide risk group at Goldman Sachs.

Traditional Black-Scholes theory uses the idea of constructing a replicating portfolio of securities with known prices to value a risky asset. But most risky assets cannot be perfectly replicated, even in theory, Derman says.

Speaking at

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