Model of stocks' volatility value based on option games
Pu Zhang · Systems Engineering - Theory & Practice · 2012
The paper discussed stocks' volatility value based on the No-Arbitrage Theory and Option Games Theory.Dividing the volatility into volatility gain option and volatility loss option,the model was built and solved with the Least-Square Monte Carlo Simulation under the assumption of heterogeneous investor.Considering continuous cash dividend and stochastic volatility,we point out that the level of volatility value is closely related with investors volatility preference,and is decided by cash dividend and volatility level.At the same time,the time parameter will affect volatility value but the initial price of stock has no effect on it.