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Αποστολέας Θέμα: Το Bitcoin ως call option  (Αναγνώστηκε 256 φορές)

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Το Bitcoin ως call option
« στις: Μαΐου 26, 2021, 12:34 »
A paper written some years ago by Lubos Pastor and Pietro Veronesi argued that the Nasdaq bubble of the late 1990s was not as bubbly as many think. This is because the growth prospects of tech companies were then highly uncertain, and such companies actually should have high valuations. This is not intuitive, so I got Professor Pastor on the phone at the University of Chicago and he walked me through the argument.

Under the dividend growth model, the value of an asset increases with the growth rate of its dividends (the model can be applied to companies that don’t pay dividends by substituting, say, growth in equity value for dividend growth). But, crucially, value does not increase in a linear relationship with growth — price accelerates as growth goes up. Why? Because of compounding. Just as, with a debt that is not paid regularly, interest accrues on interest, growth accrues on growth.

Here is the punchline: between a stock that is expected to grow 20 per cent, and a stock that is expected to grow either 10 per cent or 30 per cent with equal probabilities, the latter is worth more, because the price curve is convex (feel the geekiness coursing through you!).

Here is a graph (which may look suspiciously like I banged it out in two minutes using Microsoft Word):



Notice the convex orange line, where growth rates meet valuations. The stock marked with the blue star, which might grow fast or grow slow, has a higher valuation than the middling-growth stock marked with a red diamond. This despite having the same average expected growth rate, because of the compounding potential of the higher of its two possible growth rates.

Back to bitcoin, at last: my view is that, like an option on an unproven but promising tech company, it is either worth a whole lot more than it is now — or nothing at all. But such things are and should be worth quite a lot. As Pastor put it to me: “Lottery tickets on growth are very valuable.”