The Use of Statistical Tests to Calibrate the Black-Scholes Asset Dynamics Model Applied to Pricing Options with Uncertain Volatility
Joint Authors
Mariani, Francesca
Recchioni, Maria Cristina
Zirilli, Francesco
Fatone, Lorella
Source
Journal of Probability and Statistics
Issue
Vol. 2012, Issue 2012 (31 Dec. 2012), pp.1-20, 20 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2012-05-21
Country of Publication
Egypt
No. of Pages
20
Main Subjects
Abstract EN
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.
American Psychological Association (APA)
Fatone, Lorella& Mariani, Francesca& Recchioni, Maria Cristina& Zirilli, Francesco. 2012. The Use of Statistical Tests to Calibrate the Black-Scholes Asset Dynamics Model Applied to Pricing Options with Uncertain Volatility. Journal of Probability and Statistics،Vol. 2012, no. 2012, pp.1-20.
https://search.emarefa.net/detail/BIM-509184
Modern Language Association (MLA)
Fatone, Lorella…[et al.]. The Use of Statistical Tests to Calibrate the Black-Scholes Asset Dynamics Model Applied to Pricing Options with Uncertain Volatility. Journal of Probability and Statistics No. 2012 (2012), pp.1-20.
https://search.emarefa.net/detail/BIM-509184
American Medical Association (AMA)
Fatone, Lorella& Mariani, Francesca& Recchioni, Maria Cristina& Zirilli, Francesco. The Use of Statistical Tests to Calibrate the Black-Scholes Asset Dynamics Model Applied to Pricing Options with Uncertain Volatility. Journal of Probability and Statistics. 2012. Vol. 2012, no. 2012, pp.1-20.
https://search.emarefa.net/detail/BIM-509184
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-509184