Computational exploration of the biological basis of Black-Scholes expected utility function
Data(s) |
01/01/2007
|
---|---|
Resumo |
It has often been argued that there exists an underlying biological basis of utility functions. Taking this line of argument a step further in this paper, we have aimed to computationally demonstrate the biological basis of the Black-Scholes functional form as applied to classical option pricing and hedging theory. The evolutionary optimality of the classical Black-Scholes function has been computationally established by means of a haploid genetic algorithm model. The objective was to minimize the dynamic hedging error for a portfolio of assets that is built to replicate the payoff from a European multi-asset option. The functional form that is seen to evolve over successive generations which best attains this optimization objective is the classical Black-Scholes function extended to a multiasset scenario. <br /> |
Identificador | |
Idioma(s) |
eng |
Publicador |
Hindawi Publishing Corp. |
Relação |
http://dro.deakin.edu.au/eserv/DU:30035231/bhattacharya-computationalex-2007.pdf http://dx.doi.org/10.1155/2007/39460 https://symplectic.its.deakin.edu.au/viewobject.html?id=56299&cid=1 |
Direitos |
2007, The Authors |
Tipo |
Journal Article |