Use of Bayesian Estimates to determine the Volatility Parameter Input in the Black-Scholes and Binomial Option Pricing Models
The valuation of options and many other derivative instruments requires an estimation of exante or forward looking volatility. This paper adopts a Bayesian approach to estimate stock price volatility. We find evidence that overall Bayesian volatility estimates more closely approximate the implied vo...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2011-12-01
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| Series: | Journal of Risk and Financial Management |
| Subjects: | |
| Online Access: | http://www.mdpi.com/1911-8074/4/1/74 |