Publication detail

Qualitative phase portrait of modified Black-Scholes model

DOHNAL, M. KONEČNÝ, J. VÍCHA, T.

Original Title

Qualitative phase portrait of modified Black-Scholes model

Type

journal article - other

Language

English

Original Abstract

A qualitative model is based on only three values - positive (increasing), zero (constant) and negative (decreasing). This paper gives a simplified interpretation of some basic concepts, to eliminate the necessity of an extensive study of qualitative reasoning. The generally accepted theory of option pricing is based on the Black-Scholes model. The Black-Scholes model is transferred into a set of qualitative relations and two additional variables. Mood on stock market and risk aversion are incorporated into the qualitative model. The resulting model has 1250 solutions, and there are 16,416 transitions among them. A Chaos related interpretation of the results is presented. An example of a prediction based on modified Black-Scholes model is demonstrated below.

Keywords

Qualitative modeling; Black-Scholes model; Chaos theory

Authors

DOHNAL, M.; KONEČNÝ, J.; VÍCHA, T.

RIV year

2010

Released

20. 5. 2010

Publisher

ELSEVIER

Location

US

ISBN

0957-4174

Periodical

EXPERT SYSTEMS WITH APPLICATIONS

Year of study

37

Number

5

State

United States of America

Pages from

3823

Pages to

3826

Pages count

4

BibTex

@article{BUT50269,
  author="Mirko {Dohnal} and Jiří {Konečný} and Tomáš {Vícha}",
  title="Qualitative phase portrait of modified Black-Scholes model",
  journal="EXPERT SYSTEMS WITH APPLICATIONS",
  year="2010",
  volume="37",
  number="5",
  pages="3823--3826",
  issn="0957-4174"
}