Electronic Resource
Oxford, UK
:
Blackwell Publishing Ltd
Bulletin of economic research
41 (1989), S. 0
ISSN:
1467-8586
Source:
Blackwell Publishing Journal Backfiles 1879-2005
Topics:
Economics
Notes:
Black-Scholes price estimate of a call is commonly formed by using an estimate of the stock return variance rate in the formula. This, however, produces systematic bias with respect to the model's value with the true variance rate. This paper proposes a new procedure to form Black-Scholes price estimates using Taylor series approximation. Our Monte Carlo results favour the new procedure over the common and the recently proposed Butler-Schachter approaches when bias magnitude and any systematic pattern thereof are the relevant concerns.
Type of Medium:
Electronic Resource
URL:
http://dx.doi.org/10.1111/j.1467-8586.1989.tb00285.x
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