The Partial Distribution: Definition, Properties and Applications in Economy
In this discussed draft, we want to present the Partial Distribution (F.Dai, 2001) for discussing. We compare the partial distribution with lognormal and levy distribution. Though the levy distribution is better to describe the prices distribution of stock and stock indexes in a moderately large volatility range, the lognormal is better in a region of low values of volatility. We shall try to elucidate that the Partial Distribution is better than lognormal distribution in many respects. From partial distribution, we can acquire lots of interesting results, such as, describing the probability that stock price become zero if corresponding company collapses or the commodity price become zero if it lapses, expressing the average selling price of a commodity or stocks as the cost and average profits, and offering the accurate analytic model of American puts options pricing, etc. there are some related studies in appendix.
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- Bunch, David S & Johnson, Herb, 1992. " A Simple and Numerically Efficient Valuation Method for American Puts Using a Modified Geske-Johnson Approach," Journal of Finance, American Finance Association, vol. 47(2), pages 809-16, June.
- Boyle, Phelim P., 1988. "A Lattice Framework for Option Pricing with Two State Variables," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(01), pages 1-12, March.
- Blomeyer, Edward C. & Johnson, Herb, 1988. "An Empirical Examination of the Pricing of American Put Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(01), pages 13-22, March.
- Salvatore Micciche` & Giovanni Bonanno & Fabrizio Lillo & Rosario N. Mantegna, 2002.
"Volatility in Financial Markets: Stochastic Models and Empirical Results,"
- Miccichè, Salvatore & Bonanno, Giovanni & Lillo, Fabrizio & Mantegna, Rosario N, 2002. "Volatility in financial markets: stochastic models and empirical results," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 314(1), pages 756-761.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Ofer Biham & Zhi-Feng Huang & Ofer Malcai & Sorin Solomon, 2002. "Long-Time Fluctuations in a Dynamical Model of Stock Market Indices," Papers cond-mat/0208464, arXiv.org.
- Breen, Richard, 1991. "The Accelerated Binomial Option Pricing Model," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(02), pages 153-164, June.
- Dario Villani & Andrei E. Ruckenstein, 2000. "Looking Forward to Pricing Options from Binomial Trees," Finance 0004009, EconWPA.
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