Two issues with this post. 1) You have grossly underestimated your risk profile here. By way of example, in 2006 many financial institutions thought there was virtually no counterparty risk when dealing with large, established investment banks like Bear Sterns and Lehman Brothers. They turned out to be wrong. You imply that your "plausible" counterparty risk here is on the order 1%. Do you believe then that FTX is less of a source of counterparty risk than a large investment bank? Your position implies something like that. 2) There are multiple versions of the EMH, even if we allow that what you have shown here is a source of risk adjusted excess return, you would only be giving evidence against some variants of the EMH.
The point I was trying to make here was that your space of material risks and their probabilities are much too optimistic, so your presentation here is not “Strong Evidence” that the EMH is false. (I also mentioned that, your practical form of the EMH aside, multiple variants of the EMH make this a more complicated issue than you’ve presented, but I believe I get what you’re trying to say so that’s really just a minor quibble.)
In your second paragraph you state that there are nearly risk-free trades that net at least a 5% monthly return, i.e., an Annualize... (read more)