Publication:
Option price and market instability
| DC Field | Value | |
|---|---|---|
| dc.contributor.author | Baaquie, Belal E. | |
| dc.contributor.author | Miao, Yu | |
| dc.date.accessioned | 2018-02-04T14:43:30Z | |
| dc.date.available | 2018-02-04T14:43:30Z | |
| dc.date.issued | 2017 | |
| dc.description.abstract | An option pricing formula, for which the price of an option depends on both the value of the underlying security as well as the velocity of the security, has been proposed in Baaquie and Yang (2014). The FX (foreign exchange) options price was empirically studied in Baaquie et al., (2014), and it was found that the model in general provides an excellent fit for all strike prices with a fixed model parameters; unlike the Black-Scholes option price Hull and White (1987) that requires the empirically determined implied volatility surface to fit the option data. The option price proposed in Baaquie and Cao Yang (2014) did not fit the data during the crisis of 2007 & 2008. We make a hypothesis that the failure of the option price to fit data is an indication of the market's large deviation from its near equilibrium behavior due to the market's instability. Furthermore, our indicator of market's instability is shown to be more accurate than the option's observed volatility. The market prices of the FX option for various currencies are studied in the light of our hypothesis. | en_US |
| dc.identifier.citation | Baaquie, Belal E. & Miao, Yu. (2017). Option price and market instability. Physica A, 471, pp. 512-535 | en_US |
| dc.identifier.doi | doi:10.1016/j.physa.2016.11.080 | |
| dc.identifier.issn | 0378-4371 | |
| dc.identifier.uri | http://www.sciencedirect.com/science/article/pii/S037843711630886X | |
| dc.identifier.uri | https://ikr.inceif.org/handle/INCEIF/2796 | |
| dc.language | English | |
| dc.language.iso | en | en_US |
| dc.publisher | Elsevier | en_US |
| dc.rights | 2017. Elsevier | |
| dc.source | SEDONA | |
| dc.subject | Option | en_US |
| dc.subject | Forex | en_US |
| dc.subject | Pricing | en_US |
| dc.subject | Market instability | en_US |
| dc.title | Option price and market instability | en_US |
| dc.type | Journal Article | en_US |
| dlc.maintopic | Conventional finance | en_US |
| dspace.entity.type | Publication | |
| ikr.doctype | Scholarly Works | |
| ikr.topic.maintopic | Conventional finance | en_US |
| Appears in Collections |