Assets Quote by Charlie Munger
![“Black-Scholes works for short-term options, but if it's a long-term option and you think you know something [about the underlying asset], it's insane to use Black-Scholes.” quote by Charlie Munger](https://sms4smile.com/quotes/img-quotes/491/charlie-munger-458_assets_black-scholes-works-for-short-term-optio_947554.jpg)
“Black-Scholes works for short-term options, but if it's a long-term option and you think you know something [about the underlying asset], it's insane to use Black-Scholes.”
About This Quote
Source Speech: Annual Meeting, Berkshire Hathaway, 2005
Black‑Scholes is unsuitable for long‑term options when you claim insight into the underlying asset; it becomes irrational.
In simple terms: Black‑Scholes fails for long‑term speculative bets.
Key Takeaway
Use appropriate valuation models.
Themes
finance
risk
valuation
Mood
cautious
analytical
Type
financial
educational
When to use this quote
- portfolio management
- investment strategy
- risk assessment
Key Concepts
Option pricing
model risk
long‑term investing
Questions to Reflect On
- When is Black‑Scholes still useful?
- How to assess model suitability?
A Different Perspective
It may overlook cases where the model is adjusted for long horizons.
![“They [Mc Donalds] take people and give them a first job, which enables them to get a second job. They do a very good job of educating troubled young people to be good citizens and they're probably more successful than charter schools.” quote by Charlie Munger](https://sms4smile.com/quotes/img-quotes/a55/charlie-munger-458_be-good_they-mc-donalds-take-people-and-give-the_41809.jpg)
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![“[When I die], I will decidedly not be regretting missed opportunities for a good time. My regrets will be more along the lines of a sad list of people hurt, people let down, assets wasted and advantages squandered.” quote by Anthony Bourdain](https://sms4smile.com/quotes/img-quotes/ba3/anthony-bourdain-649_advantage_when-i-die-i-will-decidedly-not-be-regre_24502.jpg)
