Autoregressive Trending Risk Function and Exhaustion in Random Asset Price Movement

6 Pages Posted: 12 Oct 2010

See all articles by Qi Tang

Qi Tang

University of Sussex

Danni Yan

affiliation not provided to SSRN

Abstract

In this article, we look again at the derivation of Black–Scholes option value equation. The risk function involved, as we discussed, if looked at more closely, is more complicated than the standard deviation function that people are used to. This observed risk function implies interesting properties of asset price movements in real-world situations and it seems to have the ability to indicate when price move in one direction is ‘exhausted’ and a reverse of trend should take place. Therefore, a model based on random walk theory may derive autoregressive trend reversing indicator at particular moments of asset price movements.

Suggested Citation

Tang, Qi and Yan, Danni, Autoregressive Trending Risk Function and Exhaustion in Random Asset Price Movement. Journal of Time Series Analysis, Vol. 31, Issue 6, pp. 465-470, November 2010. Available at SSRN: https://ssrn.com/abstract=1688656 or http://dx.doi.org/10.1111/j.1467-9892.2010.00678.x

Qi Tang

University of Sussex ( email )

Dept of Mathematics
Sussex University
Falmer, Brighton, Sussex BNI 9RF
United Kingdom

Danni Yan

affiliation not provided to SSRN

No Address Available

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