Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
6898174 | European Journal of Operational Research | 2012 | 13 Pages |
Abstract
⺠We model European call options without assuming the underlying's returns are IID. ⺠The non-IID model gives rise to a recombinant tree with non-trivial properties. ⺠A mixture of normals closely approximates the distribution generated by the tree. ⺠We develop a closed-form option price and methods to estimate model parameters. ⺠In empirical tests, the non-IID model matches the market better than Black-Scholes.
Related Topics
Physical Sciences and Engineering
Computer Science
Computer Science (General)
Authors
Harish S. Bhat, Nitesh Kumar,