{"title":"Option Pricing: A Heuristic Based on Exponential Decay","authors":"Rogério Pereira","doi":"10.2139/ssrn.3643931","DOIUrl":null,"url":null,"abstract":"From the option prices with strike K, with K > S for calls and K < S for puts, a parameter can be estimated to calculate the prices of the entire options chain using a heuristic based on exponential decay, which has very well known applications in several natural and social phenomena. With the support of arbitrage restrictions such as the put-call parity, reasoning is validated and we can consider alternatives to evaluate forward conditions such as volatility and option prices in financial markets.","PeriodicalId":293888,"journal":{"name":"Econometric Modeling: Derivatives eJournal","volume":"275 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2020-07-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Econometric Modeling: Derivatives eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3643931","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
Option Pricing: A Heuristic Based on Exponential Decay
From the option prices with strike K, with K > S for calls and K < S for puts, a parameter can be estimated to calculate the prices of the entire options chain using a heuristic based on exponential decay, which has very well known applications in several natural and social phenomena. With the support of arbitrage restrictions such as the put-call parity, reasoning is validated and we can consider alternatives to evaluate forward conditions such as volatility and option prices in financial markets.
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