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Publikācija: The Evaluation of Financial Assets with Autocorrelations in Returns

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Nosaukums oriģinālvalodā The Evaluation of Financial Assets with Autocorrelations in Returns
Pētniecības nozare 1. Dabaszinātnes
Pētniecības apakšnozare 1.2. Datorzinātne un informātika
Autori Aigars Egle
Andrejs Matvejevs
Jegors Fjodorovs
Atslēgas vārdi Discrete time stochastic difference equation systems, ARCH models, Markov chain, Black–Scholes model, option Greeks
Anotācija In this paper, we will describe an analytical solution to a problem of pricing financial assets with autocorrelations in returns. We will develop a continuous diffusion model for the case of autocorrelation in stock returns, obtain the European call option pricing formula written on a stock with autocorrelation in returns and show that even small levels of predictability due to autocorrelation can give a substantial deviation from the results obtained by Black-Sholes formula. Also, we will calculate the modified sensitivities of the value of European call option and show how in risk management widely used option hedging parameters depend on assumptions made about correlation in underlying asset returns. Finally, we will show convergence time for the stationary solution of the derived continuous diffusion model and test its distribution.
DOI: 10.2478/v10313-012-0025-4
Atsauce Egle, A., Matvejevs, A., Fjodorovs, J. The Evaluation of Financial Assets with Autocorrelations in Returns. Information Technology and Management Science. Nr.15, 2012, 116.-119.lpp. ISSN 2255-9086. e-ISSN 2255-9094. Pieejams: doi:10.2478/v10313-012-0025-4
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ID 15255