Allende, H., Elias, C., & Torres, S. (2004). Estimation of the option prime: Microsimulation of backward stochastic differential equations. Int. Stat. Rev., 72(1), 107–121.
Abstract: 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.
