ArbTech™ has developed several proprietary products that will help eradicate Black Scholes Merton from the financial landscape. ArbTech’s suite of products also creates new financial metrics that will leave a legacy of better risk management and market analytics as we move into the post-BSM world.
Expirationless call options and expirationless put options remove the variable of time from the pricing of options. This makes ArbTech’s XPO options more valuable than any expiring options. It also means that expirationless options prices form the actual price boundary condition that links derivatives markets and cash markets. This expirationless options price frontier forms the true arbitrage pricing boundary for the pricing of all expiring options. Consequently, ArbTech’s XPO markets are critical for the establishment of healthy price relationships between the expiring instruments in derivatives markets and the generally expirationless underlying assets upon which those derivatives are traded.
As non-wasting financial instruments, expirationless options create useful new strategies for investment, trading and financial risk management. Expirationless put options create a new form of financial risk insurance. Expirationless call options create new strategies for gaining leveraged exposure to price movements without the traditional risks and costs of margin or expiring options. The combined use of ArbTech’s XPO Puts™ and XPO Calls™ across the full spectrum of options trading strategies provides for better risk management and healthier arbitrage practices than those currently available with Black Scholes Merton.
“Wall Street’s hope index”
ArbTech’s TIX™ metric creates a new gauge of investor sentiment in financial markets by using measurements of the implied time in expirationless option prices. TIX is calculated by using the shape of expirationless option price curves to measure the level of optimism about future price gains that investors are conveying at any given moment in time. In this way the TIX, also branded as the HOPE Index™ embraces the fact that most investing activity is driven by optimism about the future and not by fear. As a tool for assessing investor sentiment about future asset price movements, ArbTech’s HOPE Index can be remembered as a way to answer the question:
How Outrageous are Price Expectations?
ArbTech’s TIX provides a complement to the implied volatility index, or VIX®, which is popularly called “Wall Street’s fear index.” The calculation of ArbTech’s TIX is currently protected as a trade secret.
ArbTech’s HOPE Ratio™ is a new metric for measuring investor sentiment about future price movements in a specific financial asset. Using expirationless option prices, ArbTech’s HOPE Ratio can be calculated on virtually any financial asset including equities like Facebook®, currencies like the euro, commodities like oil and interest rate products like US Treasuries or the yield curve. ArbTech’s HOPE Ratio metrics will generally range between .75 and 4.75. Evenly balanced financial prices will have a primary HOPE Ratio of 1.0. Prices containing very high expectations of future price appreciation will have HOPE Ratios above 3.50. The calculation of ArbTech’s HOPE Ratio is currently protected as a trade secret.