How close are the option pricing formulas of Bachelier and Black-Merton-Scholes?

Details How close are the option pricing formulas of Bachelier and Black-Merton-Scholes? How close are the option pricing formulas of Bachelier and Black-Merton-Scholes?

2007-11-08

arxiv.org/abs/0711.1272v1

Economy

Quantitative Finance

Pricing of Securities

to appear in Mathematical Finance

Scientific paper

We compare the option pricing formulas of Louis Bachelier and Black-Merton-Scholes and observe -- theoretically as well as for Bachelier's original data -- that the prices coincide very well. We illustrate Louis Bachelier's efforts to obtain applicable formulas for option pricing in pre-computer time. Furthermore we explain -- by simple methods from chaos expansion -- why Bachelier's model yields good short-time approximations of prices and volatilities.

Affiliated with

Also associated with

No associations

Rating

How close are the option pricing formulas of Bachelier and Black-Merton-Scholes? does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with How close are the option pricing formulas of Bachelier and Black-Merton-Scholes?, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and How close are the option pricing formulas of Bachelier and Black-Merton-Scholes? will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-377658