We use the basic binomial option pricing method but allow someor all the parameters in the model to be uncertain and model this uncertaintyusing fuzzy numbers. We show that with the fuzzy model we can, with areasonably small number of steps, consider almost all possible future stockprices; whereas the crisp model can consider only n + 1 prices after n steps.

I examine the role of programming parameters in determining the accuracy of Genetic Programming for option pricing. I use Monte Carlo simulations to generate stock and option price data needed to develop a Genetic Option Pricing Program. I simulate data for two different stock price processes – a Geometric Brownian process and a JumpDiffusion process. In the jump-diffusion setting, I seed the G...

This paper provides an alternate method of evaluating portfolio performance of stock pricing models. We apply Pitman Closeness Criterion to compare the accuracy of three popular pricing models. This comparison is used to assess which, if any, model outperforms the others. In assessing model performance over a long period of time, we find that the Fama-French three-factor model and the Carhart f...

The investigation of investor sentiment and its relation to stock returns, volatility and asset valuation is the subject of considerable debate in many empirical researches. Using indirect sentiment measures, we provide evidence that sentiment levels and changes have important predictive power for stock returns. In addition, we find that most of our sentiment measures cause volatility rather th...

This paper proposes a method for pricing derivatives under the GARCH assumption for underlying assets in the context of a “dynamic” version of Gerber-Shiu’s optionpricing model. Instead of adopting the notion of local risk-neutral valuation relationship (LRNVR) introduced by Duan (1995), we employ the concept of conditional Esscher transforms introduced by Bühlmann et al. (1996) to identify a m...

According to the nature of their activities, banks are exposed to various types of risks. Hence, risk management is at the heart of financial institutions management. In this study, we intend to summarize the information content of bank financial statements on diverse risks faced by banks and then determine how stock markets react to bank's risk management behavior. The methodology used in this...

Noise traders as one of the key elements of the market play a significant role in determining the market volatilities, returns, and stock market mispricing. Hence, this study attempts to scrutinize the role of noise trading in capital asset pricing. Therefore, by using daily data, samples including 14105 data of 200 companies listed on stock exchange were selected and noise trading index was es...

in this paper, the pricing of a european call option on the underlying asset is performed by using a monte carlo method, one of the powerful simulation methods, where the price development of the asset is simulated and value of the claim is computed in terms of an expected value. the proposed approach, applied in monte carlo simulation, is based on the black-scholes equation which generally def...