文件名称:Stock Modeling
文件大小:391KB
文件格式:PDF
更新时间:2012-09-06 11:49:59
Stock Modeling
In this paper, we propose a novel simple but empirically very consistent stochastic model for stock price dynamics and option pricing, which not only has the same ana- lyticity as log-normal and Black-Scholes model, but can also capture and explain all the main puzzles and phenomenons arising from empirical stock and option markets which log-normal and Black-Scholes model fail to explain. In addition, this model and its parameters have clear economic interpretations. Large sample empirical cal- ibration and tests are performed and show strong empirical consistency with our model's assumption and implication. Immediate applications on risk management, equity and option evaluation and trading, etc are also presented.