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 collapse. This paper gives a short description of knowledge society and proposes methods for option price estimation based on implied volatility, skewness and kurtosis. â€˜Free-lunchâ€™ 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.
Volume (Year): 16 (2012)
Issue (Month): 4 ()
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