Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7375995 | Physica A: Statistical Mechanics and its Applications | 2018 | 32 Pages |
Abstract
An empirical study of the Brazilian option market is presented in light of three option pricing models, namely the Black-Scholes model, the exponential model, and a model based on a power law distribution, the so-called q-Gaussian distribution or Tsallis distribution. It is found that the q-Gaussian model performs better than the Black-Scholes model in about one third of the option chains analyzed. But among these cases, the exponential model performs better than the q-Gaussian model in 75% of the time. The superiority of the exponential model over the q-Gaussian model is particularly impressive for options close to the expiration date, where its success rate rises above ninety percent.
Related Topics
Physical Sciences and Engineering
Mathematics
Mathematical Physics
Authors
William O. Sosa-Correa, Antônio M.T. Ramos, Giovani L. Vasconcelos,