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Empirical Contributions to Optionpricing analyzing Black and Scholes and other Models

Listed author(s):
  • Gerhard Schroeder

    (Privat Experimental Research)

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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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
Handle: RePEc:wpa:wuwpif:0510024
Note: Type of Document - pdf; pages: 34
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