SciELO - Scientific Electronic Library Online

 
vol.34 issue65Social preferences are not enough: Accounting for anomalous behavior in a complex mixed-motive game.Volatility forecasting for Mexican crude oil market in the presence of asymmetric effects author indexsubject indexarticles search
Home Pagealphabetic serial listing  

Services on Demand

Article

Indicators

Related links

  • On index processCited by Google
  • Have no similar articlesSimilars in SciELO
  • On index processSimilars in Google

Share


Cuadernos de Economía

Print version ISSN 0121-4772

Abstract

MOLINA, Andrés Mauricio  and  JIMENEZ, José Alfredo. Valuation for European derivatives with mixture-Weibull distributions. Cuad. Econ. [online]. 2015, vol.34, n.65, pp.279-298. ISSN 0121-4772.  http://dx.doi.org/10.15446/cuad.econ.v34n65.48656.

The Black-Scholes valuation model for European options is widely used in the stock markets due to its easy implementation. However, the model is not accurate for different assets whose dynamics do not follow those of a lognormal distribution, so it is necessary to investigate new distributions to price different options written on various underlying assets. Several researchers have worked on new valuation formulas, assuming different distributions for either the price of the underlying asset or for the return of the same. This paper presents two methods for European derivatives valuation, one of them, modifying the formula using a Weibull distribution with two parameters given by Savickas (2002) adding two new parameters (scale and location), and another assuming that the underlying distribution is a Weibull mixture. Comparisons are also presented with these models against existing models such as the Black-Scholes model and Savickas with a simple Weibull distribution.

Keywords : Weibull distribution; mixture of Weibull; valuation; European options.

        · abstract in Spanish | French | Portuguese     · text in Spanish     · Spanish ( pdf )