The use of statistical tests to calibrate the Black-Scholes asset dynamics model applied to pricing options with uncertain volatility (Q428367): Difference between revisions
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Summary: A new method for calibrating the Black-Scholes asset price dynamics model is proposed. The data used to test the calibration problem included observations of asset prices over a finite set of (known) equispaced discrete time values. Statistical tests were used to estimate the statistical significance of the two parameters of the Black-Scholes model: the volatility and the drift. The effects of these estimates on the option pricing problem were investigated. In particular, the pricing of an option with uncertain volatility in the Black-Scholes framework was revisited, and a statistical significance was associated with the price intervals determined using the Black-Scholes-Barenblatt equations. Numerical experiments involving synthetic and real data were presented. The real data considered were the daily closing values of the S\&P500 index and the associated European call and put option prices in the year 2005. The method proposed here for calibrating the Black-Scholes dynamics model could be extended to other science and engineering models that may be expressed in terms of stochastic dynamical systems. | |||
Property / review text: Summary: A new method for calibrating the Black-Scholes asset price dynamics model is proposed. The data used to test the calibration problem included observations of asset prices over a finite set of (known) equispaced discrete time values. Statistical tests were used to estimate the statistical significance of the two parameters of the Black-Scholes model: the volatility and the drift. The effects of these estimates on the option pricing problem were investigated. In particular, the pricing of an option with uncertain volatility in the Black-Scholes framework was revisited, and a statistical significance was associated with the price intervals determined using the Black-Scholes-Barenblatt equations. Numerical experiments involving synthetic and real data were presented. The real data considered were the daily closing values of the S\&P500 index and the associated European call and put option prices in the year 2005. The method proposed here for calibrating the Black-Scholes dynamics model could be extended to other science and engineering models that may be expressed in terms of stochastic dynamical systems. / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91G70 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91G20 / rank | |||
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Property / zbMATH DE Number | |||
Property / zbMATH DE Number: 6047885 / rank | |||
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Property / MaRDI profile type | |||
Property / MaRDI profile type: MaRDI publication profile / rank | |||
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Property / full work available at URL | |||
Property / full work available at URL: https://doi.org/10.1155/2012/931609 / rank | |||
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Property / OpenAlex ID | |||
Property / OpenAlex ID: W1966024889 / rank | |||
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Property / Wikidata QID | |||
Property / Wikidata QID: Q58911004 / rank | |||
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Property / cites work | |||
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links / mardi / name | links / mardi / name | ||
Latest revision as of 09:28, 5 July 2024
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English | The use of statistical tests to calibrate the Black-Scholes asset dynamics model applied to pricing options with uncertain volatility |
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The use of statistical tests to calibrate the Black-Scholes asset dynamics model applied to pricing options with uncertain volatility (English)
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19 June 2012
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Summary: A new method for calibrating the Black-Scholes asset price dynamics model is proposed. The data used to test the calibration problem included observations of asset prices over a finite set of (known) equispaced discrete time values. Statistical tests were used to estimate the statistical significance of the two parameters of the Black-Scholes model: the volatility and the drift. The effects of these estimates on the option pricing problem were investigated. In particular, the pricing of an option with uncertain volatility in the Black-Scholes framework was revisited, and a statistical significance was associated with the price intervals determined using the Black-Scholes-Barenblatt equations. Numerical experiments involving synthetic and real data were presented. The real data considered were the daily closing values of the S\&P500 index and the associated European call and put option prices in the year 2005. The method proposed here for calibrating the Black-Scholes dynamics model could be extended to other science and engineering models that may be expressed in terms of stochastic dynamical systems.
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