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Empirical Contributions to Optionpricing analyzing Black and Scholes and other Models

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Author Info
Gerhard Schroeder (Privat Experimental Research)

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Abstract

By analyzing fictitious options - a unique approach - significant mispricing due to the formula of Black and Scholes can be shown systematically and independent from market distortion. Even options based on fictitious, lognormally distributed courses are not valued properly. According to the Law of Large Numbers pricing models based on time distibutions should be applied to strategies rather than to single option prices. The discontinuity of autocorrelation (Stalagmites Effect) has impact on forecasting models. The current impact of volatility - there is no - on option pricing is not justified.

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File URL: http://129.3.20.41/eps/if/papers/0510/0510024.pdf
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Publisher Info
Paper provided by EconWPA in its series International Finance with number 0510024.

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Length: 34 pages
Date of creation: 24 Oct 2005
Date of revision:
Handle: RePEc:wpa:wuwpif:0510024

Note: Type of Document - pdf; pages: 34
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Web page: http://129.3.20.41

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Related research
Keywords: Black Scholes; fair value; option pricing; mispricing; derivatives; stalagmites effect; artificially generated 'cloned' quotations; test methods; experimental economical research; predicting; forecasting;

Find related papers by JEL classification:
F3 - International Economics - - International Finance
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

This paper has been announced in the following NEP Reports:

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