A modification term for Black-Scholes model based on discrepancy calibrated with real market data

The Black-Scholes option pricing model (B-S model) generally requires the assumption that the volatility of the underlying asset be a piecewise constant. However, empirical analysis shows that there are discrepancies between the option prices obtained from the B-S model and the market prices. Most c...

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Bibliographic Details

Published in:	Data Science in Finance and Economics
Main Authors:	Xiaozheng Lin, Meiqing Wang, Choi-Hong Lai
Format:	Article
Language:	English
Published:	AIMS Press 2021-12-01
Subjects:	option pricing black-scholes model modification term disturbance term higher-order algorithm second-order derivatives
Online Access:	https://www.aimspress.com/article/doi/10.3934/DSFE.2021017?viewType=HTML