The Statistical Properties of the Black–Scholes Option Price
Mthuli Ncube () and
Mathematical Finance, 1997, vol. 7, issue 3, 287-305
This paper investigates the statistical properties of the Black–Scholes option price, considered as a random variable. The option is conditioned on the current price and/or the estimated volatility of the underlying security. In both cases, some exact results for the distribution functions of the true option price and the predicted option price are derived. Extensions to puts and American contracts are considered. Numerical results are presented for option prices based on parameters appropriate for the FTSE 100 Index.
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