재무연구 제 권 호 (2009년 8월)
Asian Review of Financial Research, Vol., No..
pp.842~862
pp.842~862
Pricing Derivatives with Optimized Gaussian Mixture
Seung Youn Cha Seoul National University, Seoul, Korea
Doo Bae Jun Seoul National University, Seoul, Korea
We introduce optimized Gaussian mixture model to price derivatives. The research examines stock market data to discuss the normality assumption of Black-Sholes(1973) model and its application to stock market. We develop and simulate a new kernel density, derived from optimized Gaussian mixture, to ameliorate the performance of the classic option pricing theory. This paper tests and suggests optimized Gaussian mixture model by varying period length and characteristics of basis asset data. Our model is compared to the normal and regime switching model.
Seung Youn Cha
Doo Bae Jun
We introduce optimized Gaussian mixture model to price derivatives. The research examines stock market data to discuss the normality assumption of Black-Sholes(1973) model and its application to stock market. We develop and simulate a new kernel density, derived from optimized Gaussian mixture, to ameliorate the performance of the classic option pricing theory. This paper tests and suggests optimized Gaussian mixture model by varying period length and characteristics of basis asset data. Our model is compared to the normal and regime switching model.
