Abstract
A mathematical statistical model is needed to obtain an option prime and create a hedging strategy. With formulas derived from stochastic differential equations, the primes for US Dollar/Chilean Pesos currency options using a prime calculator are obtained. Furthermore, a backward simulation of the option prime trajectory is used with a numerical method created for backward stochastic differential equations. The use of statistics in finance is highly important in order to develop complex products.
Citation
Héctor Allende. Carlos Elías. "Estimation of the Option Prime: Microsimulation of Backward Stochastic Differential Equations." Internat. Statist. Rev. 72 (1) 107 - 121, April 2004.
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