Option Price Estimations and Speculative Trading In Knowledge Society
Derivatives market has known an enormous and continuous development from the late 1970s, thanks to the most celebrated Black-Scholes-Merton formula. The impact on global economy is also tremendous, but due to the high leverage of speculative option trading there is a perpetual danger of economic col...
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| Format: | Article |
| Language: | English |
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Inforec Association
2012-01-01
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| Series: | Informatică economică |
| Subjects: | |
| Online Access: | http://www.revistaie.ase.ro/content/64/15%20-%20Turcoane.pdf |
| Summary: | Derivatives market has known an enormous and continuous development from the late 1970s, thanks to the most celebrated Black-Scholes-Merton formula. The impact on global economy is also tremendous, but due to the high leverage of speculative option trading there is a perpetual danger of economic collapse. This paper gives a short description of knowledge society and proposes methods for option price estimation based on implied volatility, skewness and kurtosis. ‘Free-lunch’ is hardly achievable if one predicts the option price using the knowledgeable information from the market and there is almost impossible to speculate, rather than to hedge, when trading option. |
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| ISSN: | 1453-1305 1842-8088 |