Option Pricing Model with Time-Varying Volatility

dc.contributor.author	Ncube, Mthuli
dc.coverage.spatial	Zimbabwe.	en
dc.date.accessioned	2015-08-03T15:19:15Z
dc.date.available	2015-08-03T15:19:15Z
dc.date.issued	1991-10
dc.identifier.citation	Ncube, M. (1991) Option Pricing Model with Time-Varying Volatility. Working Papers in Economics, October, 1991. UZ, Mt Pleasant Harare: Dept of Economics.	en
dc.identifier.uri	https://opendocs.ids.ac.uk/opendocs/handle/20.500.12413/6655
dc.description.abstract	The paper extends the option pricing model of Merlon (1973) with lime-varying volatility of the underlying security. We develop the theoretical option model. Time-varying volatility is constructed by fitting a lime-polynomial to implied volatility values where the order of the polynomial is approximated by the number of options considered. We then predict the option price one day forward and compare the results with the standard Black and Scholcs model. When applied to PT-SE 100 index European options the new model was found to be more accurate titan the Black and Scholcs. Key words: Omion. Time-Varying. Volatility, Black and Scholcs.	en
dc.language.iso	en	en
dc.publisher	Department of Economics. University of Zimbabwe (UZ.)	en
dc.relation.ispartofseries	Working Papers in Economics;
dc.rights.uri	http://creativecommons.org/licenses/by-nc-nd/3.0/	en
dc.subject	Development Policy	en
dc.subject	Economic Development	en
dc.subject	Finance	en
dc.title	Option Pricing Model with Time-Varying Volatility	en
dc.type	IDS Working Paper	en
dc.rights.holder	University of Zimbabwe (UZ)	en

Except where otherwise noted, this item's license is described as http://creativecommons.org/licenses/by-nc-nd/3.0/