macrocephalopod

I would first try to see*if* NOPE works, then after the *if,* move to the (crucial) *why* it works. I guess, in general, mean reverting phenomena can be "noped," right?

I mean, can you derive nope's formula in a model? (a framework in which there are equilibrium conditions, you know, certain axioms, agents optimizing, market clearing condition, etc). It is clear that you have some intuition for why it works (and you clearly believe it works)

I mean. I wrote about the toy model where it comes from in that article. So... yes? It has to work for the reasons I elaborated yesterday on.

ok!

It arises from the understanding that dynamic replication of the options position isn't actually possible perfectly in a finite liquidity environment. Does it mean that the NOPE is the perfect formula to measure it or the effect is tradeable? No. Does it assuming the logic

is correct mean it must exist? Yes.

So nope measures a "liquidity" factor? In other words, if markets were fully "liquid" (elusive concept but whatever), NOPE would be constant and (I guess) 0? If this is all about liquidity, what's the difference with https://www.journals.uchicago.edu/doi/abs/10.1086/374184 … ?