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Difference between Black-Scholes theory and ObV theory
- Mr. Black and Mr. Scholes assume Winner process and as a
Options pricing using OBV method Krzysztof Urbanowicz Quant - - PowerPoint PPT Presentation
Options pricing using OBV method Krzysztof Urbanowicz Quant - - PowerPoint PPT Presentation
Options pricing using OBV method Krzysztof Urbanowicz Quant Technology Difference between Black-Scholes theory and ObV theory Mr. Black and Mr. Scholes assume Winner process and as a consequence Normal distribution of returns. We assume more
SLIDE 2
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Probability Density Distributions – Normal Distribution
0.1 0.2 0.3 0.4 0.5 0.6
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Probability Density Distributions – Power-Law Distribution
0.1 0.2 0.3 0.4 0.5 0.6
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Probability Density Function (PDF) – fit to reality
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Black-Scholes theory – behaviour of probable future prices in time
- 30
- 20
- 10
10 20 30
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ObV theory – behaviour of probable future prices in time
- 30
- 20
- 10
10 20 30
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ObV options pricing – Volatility Smile
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ObV options pricing – Volatility Smile
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ObV options pricing – Volatility Smile
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Result of Delta Hedge Strategy based on Black-Scholes Model
- 15000000
- 10000000
- 5000000
5000000 10000000
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Result of Delta Hedge Strategy based on ObV Model
- 20000000
20000000 40000000 60000000 80000000 100000000
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Result of Delta Hedge Strategy based on ObV Model
Results of backtest http://www.wonabru.com/options/backtest
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