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Persistent link: https://www.econbiz.de/10010847052
We investigate the position of the Buchen-Kelly density (Peter W. Buchen and Michael Kelly. The maximum entropy distribution of an asset inferred from option prices. <italic>Journal of Financial and Quantitative Analysis</italic>, <italic>31</italic>(1), 143-159, March 1996.) in the family of entropy maximizing densities from...
Persistent link: https://www.econbiz.de/10010973369
In Neri and Schneider (2012) we presented a method to recover the Maximum Entropy Density (MED) inferred from prices of call and digital options on a set of n strikes. To find the MED we need to numerically invert a one-dimensional function for n values and a Newton-Raphson method is suggested....
Persistent link: https://www.econbiz.de/10010599952
We investigate the position of the Buchen-Kelly density in a family of entropy maximising densities which all match European call option prices for a given maturity observed in the market. Using the Legendre transform which links the entropy function and the cumulant generating function, we show...
Persistent link: https://www.econbiz.de/10008833254
We introduce a multi-factor stochastic volatility model based on the CIR/Heston stochastic volatility process. In order to capture the Samuelson effect displayed by commodity futures contracts, we add expiry-dependent exponential damping factors to their volatility coefficients. The pricing of...
Persistent link: https://www.econbiz.de/10011185194
This paper examines emerging industries that exhibit positive network effects. We put forward a dynamic model in which two technologies compete to be the standard. The model provides a quantitative method for the valuation of firms. We use the model to examine the relationship between network...
Persistent link: https://www.econbiz.de/10010753570