IEM Analysis Spit’n’Polish Dept

by Kieran Healy on September 9, 2004

As a spin-off from Daniel’s discussion of “whether the DEM04 contract is overvalued”: on the “Iowa Electronic Markets”:, here’s a version of the trend surface he calculated that shows “differences between the Black-Scholes valuation and the observed market price”: over time (you can look at it in smaller “PNG”: format or better-quality “PDF”: I created it using “R”:, the free[1] statistics package because I “didn’t like Excel’s default effort”: and I hadn’t had a reason to use R’s wireframe() function before. It’s still not up to the standards of the “Bill Clevelands”: or “Ed Tuftes”: of this world, but it was the best I could manage on short notice. Thanks to Daniel for sending me the data, and remember that whereas I am happy to field questions about graph colors and chart widgets, technical queries about option valuation, Black-Scholes volatility fluctuations and arbitrage should still be directed to him.

fn1. As in “free to make your own mistakes.”



Jonathan Goldberg 09.09.04 at 1:27 pm

” It’s still not up to the standards of the Bill Clevelands or Ed Tuftes of this world…”

So little is. I just read Tufte’s “The Cogitive Style of Powerpoint.” Wonderful. I wish everyone who presents using PP outpoint output had to read it first.


dsquared 09.09.04 at 1:32 pm

Well yes, I must agree, that is a bloody impressive plot.


dsquared 09.09.04 at 6:21 pm

Right, inspired by that, I have now downloaded R. Any chance of posting the R commands which created the plot?


Kieran Healy 09.09.04 at 10:07 pm

Sure, here ya go:

The code is in “surface.r”: and uses “this CSV data file”:


dsquared 09.09.04 at 10:13 pm

god that’s impressive. this looks like it’s going to be a ton of fun.

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