2011/12/20 by Cristin Buescu, Buescu, Cristin, Michael Taksar +3
Economics, Econometrics and Finance · #60J65 #62F10 #62G05 #62P05 #91G20 #Applications (stat.AP) #Complex Systems and Time Series Analysis #FOS: Computer and information sciences #FOS: Economics and business #FOS: Mathematics #Financial Risk and Volatility Modeling #Pricing of Securities (q-fin.PR) #Probability (math.PR) #Statistical Finance (q-fin.ST) #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.1112.4534
openalex publication_date 2011/12/20 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We use the expectation of the range of an arithmetic Brownian motion and the method of moments on the daily high, low, opening and closing prices to estimate the volatility of the stock price. The daily price jump at the opening is considered to be the result of the unobserved evolution of an after-hours virtual trading day.The annualized volatility is used to calculate Black-Scholes prices for European options, and a trading strategy is devised to profit when these prices differ flagrantly from the market prices.