This paper shows how one can compute option prices from a Bayesian inference viewpoint, using an econometric model for the dynamics of the return and of the volatility of the underlying asset. The proposed evaluation of an option is the predictive expectation of its payoff function. The...

Bayesian statistical methods are naturally oriented towards pooling in a rigorous way information from separate sources. It has been suggested that both historical and implied volatilities convey information about future volatility. However, typically in the literature implied and return...