"Because the ability to predict the better-performing investment is equivalent to holding a call option on the market, in any given period, when the risk-free rate is known, we can use option-pricing models to assign a dollar value to the potential contribution of perfect timing ability. This contribution would constitute the fair fee that a perfect timer could charge investors for his or her services. Placing a value on perfect timing also enables us to assign value to less-than-perfect timers. The exercise price of the perfect-timer call option on $1 of the equity portfolio is the final value of the T-bill investment. Using continuous compounding, this is $1 * exp(rt). When you use this exercise price in the Black-Scholes formula for the value of the call option, the formula simplifies considerably to: MV(Perfect timer per $ of assets) = C = 2N[0.5*σ(M)*sqrt(T)] - 1"
@Shau_2207 which example?Hello All, Can anyone please help an example?