daily snapshot | 04 august 2010

August 4, 2010
  • Pricing / validating prices of new options using regression analysis ? Black-Scholes pricing essentially represents non-linear relationship between option price and price determinants (time to maturity, spot price, strike price, risk free rate, volatility + quantiles of normal distribution) 
  • The question is using option market trade data to create nonlinear model of this dependency – predict future prices using regression , calculate BS prices and compare values with actual traded prices.
  • Computational Complexity and Information Asymmetry in Financial Products
  • Thirty Books Everyone Should Read Before They’re Thirty – interesting selection
  • Use and abuse of dummy variable regression – differences between regression trees and single regression with dummies ? The danger of perfect collinearity with large number of boolean dummy variables.

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