Sigma Plus Consulting
|
|
|
|
Option Pricing ModelsOption pricing often relies upon equilibrium models for its underlying mathematics. These models are then calibrated to market prices. Option pricing models do not usually include explicit assumptions about the real world probabilities of different scenarios occurring, but rather bundle the real world probabilities with a risk premium to produce risk neutral probabilities. When using option pricing models to generate future scenarios, one must extend the models to separate the real world probabilities from the risk neutral probabilities. Calibration will then include both market prices and historical time series.
For further information contact us at info@sigmaplus.com.au |
|
