Negative volatility and the Survival of Western Financial Markets

Knut Aase

No 2004/5, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: The paper discusses situations where certain parameters are given values that are outside their natural ranges. One case is obtained when plugging in a negative value for the volatility parameter in the Black and Scholes formula. This leads to seemingly "new" results.

A different setting is considered related to the developments in time of biological populations. Here deterministic models lead to chaotically fluctuating population sizes, which came as a surprise to workers with population data.

It is argued that the origins for the seemingly new and original results may be related.

Keywords: The Black and Scholes Model; negative volatility; population models; chaotic fluctuations; bifurcation (search for similar items in EconPapers)
JEL-codes: G10 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2004-03-17
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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