Estimation of the option prime: Microsimulation of backward stochastic differential equations
Allende
H
author
Elias
C
author
Torres
S
author
2004
English
A mathematical statistical model is needed to obtain an option prime and create a hedging strategy. With formulas derived from stochastic differential equations, the primes for US Dollar/Chilean Pesos currency options using a prime calculator are obtained. Furthermore, a backward simulation of the option prime trajectory is used with a numerical method created for backward stochastic differential equations. The use of statistics in finance is highly important in order to develop complex products.
Black-Scholes model
stochastic differential equations
options prime
hedging strategy
WOS:000222159200009
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text
http://www3.interscience.wiley.com/journal/119921798/abstract
http://ficpubs.uai.cl/files/45_Allende_etal2004.pdf
http://www3.interscience.wiley.com/journal/119921798/abstract
Allende_etal2004
International Statistical Review
Int. Stat. Rev.
2004
Int Statistical Inst
continuing
periodical
academic journal
72
1
107
121
0306-7734