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Autoregressive trending risk function and exhaustion in random asset price movement
Author(s) -
Tang Qi,
Yan Danni
Publication year - 2010
Publication title -
journal of time series analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.576
H-Index - 54
eISSN - 1467-9892
pISSN - 0143-9782
DOI - 10.1111/j.1467-9892.2010.00678.x
Subject(s) - autoregressive model , econometrics , mathematics , asset (computer security) , basis risk , function (biology) , random walk , movement (music) , economics , capital asset pricing model , statistics , computer science , computer security , evolutionary biology , biology , philosophy , aesthetics
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.