Option pricing: back to the thinking of Bachelier
This study compares modifications of Bachelier's expected-value theory with the Black and Scholes model using implicit parameters from actual option market prices or option premiums. For the purpose of this study, seven Dutch option series were analysed over a period of five months in 2004. In all cases the expected-value based models show a better fit with the actual market data than Black and Scholes model. The biggest deviations between model-predicted and actual market prices are about 8%; they occur in the Black and Scholes model at low option premiums.
Year of publication: |
2006
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Authors: | Versluis, Cokki |
Published in: |
Applied Financial Economics Letters. - Taylor and Francis Journals, ISSN 1744-6546. - Vol. 2.2006, 3, p. 205-209
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Publisher: |
Taylor and Francis Journals |
Saved in:
freely available
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