Event-Driven Finance Trading Biotech Events at Intermediate Time-Scales
The pricing models studied in academic settings are simple models with generally a single time scale. This has the practical consequence that the calculated volatility smiles are generic and actually never fit real events. One example of a financial event introducing an additional time scale is earnings. More complicated situations are drug announcements. The latter can involve multiple time scales, uncertain dates, and asymmetric binary movement in the underlying.
Paradoxically, one consequence of the nature of biotech events is that they can be traded with ridiculously simple models. In this talk, Prof. Lipkin will walk through a few illustrative examples of biotech events and how they might be monetized.
Mike Lipkin has co-taught Event-Driven Finance at NYU Tandon and before that at Columbia for 15 years. In addition to publications in the field of financial math, all related to events, he also trades events for his personal account, such as the kind discussed here. Prior to Columbia, he spent 23 years on the AMEX/NYSE floor as an options market-maker.