Wednesday, November 14, 2007

News Sense

Okay, my news sense isn't always infallible. Sometimes I think I'm on to something big, and it fizzles.

Such is the case with the Microsoft annual meeting held yesterday. There were two shareholder resolutions, and I discussed them in Monday's entry. There's really nothing to say about yesterday's meeting, though, except that all members of the board of directors were re-elected and, as the company management had recommended, both resolutions went down to defeat.

Sometimes I sense a story in the world of academic in-fighting, too. This can work out, but might not.

On Friday, I wrote a story for HedgeWorld (my dayjob) about such an academic dispute, in the world of quantitative finance. I over-state the degree to which I understand such things when I write of them, but hey -- I did take a course in calculus once.

The underlying conflict is between Nassim Taleb and the remaining authors of the famous/infamous Black-Scholes articles concerning the pricing of stock options. Fischer Black, alas, is deceased. The other namesake of the formula, Myron Scholes, is very much alive, as is Robert Merton.

Both Scholes and Merton won a Nobel Prize for their work on Black-Scholes, sometimes more generously called Black-Scholes-Merton. But Nassin Taleb, the author of a couple of widely-read books on risk and its management, says that the formula in the form they offered it, doesn't work very well. Options traders don't use it. Further, he says, it wasn't original enough with them to have their names on it, so it should be called Bachelier-Thorp if referenced any more at al.

I thought this was a big story. I did the usual consacientious reporterly work, wrote up various views of Black-Scholes on the one hand and Taleb's challenge on the other, and my editors posted the result at HedgeWorld.

One of the responses I've had since then has been to the effect that it isn't really newsworthy. Some bitter second-rate fellow envies the Nobel Prize winners and is trying to tear them down: why is that a story? one reader asked me.

All I could say is that arguing over what is newsworthy and what isn't is a mugs game, and I declined to get involved in it. She might be right, and Taleb might simply disappear.

Or, this might be the start of something big, and my readers would have heard of it early on. Damned if I know which is the case.

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