Option Price Estimations and Speculative Trading In Knowledge Society

Ovidiu Turcoane ()

Informatica Economica, 2012, vol. 16, issue 4, 131-141

Abstract: Derivatives market has known an enormous and continuous development from the late 1970s, thanks to the most celebrated Black-Scholes-Merton formula. The impact on global economy is also tremendous, but due to the high leverage of speculative option trading there is a perpetual danger of economic collapse. This paper gives a short description of knowledge society and proposes methods for option price estimation based on implied volatility, skewness and kurtosis. ‘Free-lunch’ is hardly achievable if one predicts the option price using the knowledgeable information from the market and there is almost impossible to speculate, rather than to hedge, when trading option.

Keywords: Ethics; Knowledge Society; Option Pricing; Implied Volatility, Skewness, Kurtosis; Minimization Algorithm (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:aes:infoec:v:16:y:2012:i:4:p:131-141

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