Fat tails and colored noise in financial derivatives

We study the effect of heavy tails and correlations on the price of the one of the simplest financial derivative: the European call option. We see that both effects have opposite and nontrivial consequences on the price of the derivatives.

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Year of publication:	2002
Authors:	Perelló, Josep ; Masoliver, Jaume
Published in:	Physica A: Statistical Mechanics and its Applications. - Elsevier, ISSN 0378-4371. - Vol. 314.2002, 1, p. 736-742
Publisher:	Elsevier
Subject:	Martingale option pricing method \| Heavy tails \| Correlated stocks

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011057829