Bayesian Analysis of the Black-Scholes Option Price
View / Open Files
Authors
Darsinos, Theofanis
Satchell, Stephen E.
Publication Date
2004-06-16Series
Cambridge Working Papers in Economics
Publisher
Faculty of Economics
Language
en_GB
Type
Working Paper
Metadata
Show full item recordCitation
Darsinos, T., & Satchell, S. E. (2004). Bayesian Analysis of the Black-Scholes Option Price. https://doi.org/10.17863/CAM.5443
Abstract
This paper investigates the statistical properties of the Black-Scholes option price under a Bayesian approach. We incorporate randomness, both in the price process and in volatility, to derive the prior and posterior densities of a European call option. Expressions for the density of the option price conditional on the sample estimates of volatility and on the asset price respectively, are also derived. Numerical results are presented to compare how the dispersion of the option price changes in the transition from prior to posterior information, where information may be price or sample variance or both.
Identifiers
This record's DOI: https://doi.org/10.17863/CAM.5443
Statistics
Total file downloads (since January 2020). For more information on metrics see the
IRUS guide.
Recommended or similar items
The current recommendation prototype on the Apollo Repository will be turned off on 03 February 2023. Although the pilot has been fruitful for both parties, the service provider IKVA is focusing on horizon scanning products and so the recommender service can no longer be supported. We recognise the importance of recommender services in supporting research discovery and are evaluating offerings from other service providers. If you would like to offer feedback on this decision please contact us on: support@repository.cam.ac.uk