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The weighted variance minimization for options pricing

Author

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  • Gormin A. A.

    (Saint-Petersburg State University, Faculty of Mathematics and Mechanics, Department of Statistical Simulation, 198504 St. Petersburg, Russia. Email: Anatoliy.Gormin@pobox.spbu.ru)

  • Kashtanov Y. N.

    (Saint-Petersburg State University, Faculty of Mathematics and Mechanics, Department of Statistical Simulation, 198504 St. Petersburg, Russia. Email: Yuri.Kashtanov@paloma.spbu.ru)

Abstract

A problem of the weighted variance minimization for options pricing in the case of a diffusion model is considered. We estimate a number of options with different values of some parameter which can be a strike price, an exercise date, a barrier, etc. The optimal estimators in the general case and their approximations for some options are pointed out.

Suggested Citation

  • Gormin A. A. & Kashtanov Y. N., 2008. "The weighted variance minimization for options pricing," Monte Carlo Methods and Applications, De Gruyter, vol. 13(5-6), pages 333-351, January.
    • Handle: RePEc:bpj:mcmeap:v:13:y:2008:i:5-6:p:333-351:n:1
    DOI: 10.1515/mcma.2007.018
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    References listed on IDEAS

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    1. Wilmott,Paul & Howison,Sam & Dewynne,Jeff, 1995. "The Mathematics of Financial Derivatives," Cambridge Books, Cambridge University Press, number 9780521497893, January.
    2. Turnbull, Stuart M. & Wakeman, Lee Macdonald, 1991. "A Quick Algorithm for Pricing European Average Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(3), pages 377-389, September.
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