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April 2004 Estimation of the Option Prime: Microsimulation of Backward Stochastic Differential Equations
Héctor Allende, Carlos Elías
Internat. Statist. Rev. 72(1): 107-121 (April 2004).

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.

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Héctor Allende. Carlos Elías. "Estimation of the Option Prime: Microsimulation of Backward Stochastic Differential Equations." Internat. Statist. Rev. 72 (1) 107 - 121, April 2004.

Information

Published: April 2004
First available in Project Euclid: 15 March 2004

zbMATH: 1171.91339

Rights: Copyright © 2004 International Statistical Institute

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Vol.72 • No. 1 • April 2004
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