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Research Conducted at University of Paris I Has Provided New Information about Economic Modelling (Collective behavior and options volatility smile:...

July 4, 2014



Research Conducted at University of Paris I Has Provided New Information about Economic Modelling (Collective behavior and options volatility smile: An agent-based explanation)

By a News Reporter-Staff News Editor at Economics Week -- Research findings on Economic Modelling are discussed in a new report. According to news reporting originating in Paris, France, by VerticalNews journalists, research stated, "This paper represents an initial effect to shed light on the determinants of option implied volatility smile from the micro perspective of traders' behavior."

The news reporters obtained a quote from the research from the University of Paris I, "We compare the zero intelligence behavior and the collective behavior with the agent-based simulation. We find that the constant implied volatility, which is the assumption of the Black-Scholes model, can be obtained under the environment of the zero intelligence traders; while the smile shape of implied volatility, which is more consistent with the practical option market worldwide, can be explained by traders' collective behavior."

According to the news reporters, the research concluded: "Moreover, different degrees of collective behavior are tested to result that with the increasing of collective degree the implied volatility curve becomes steeper."

For more information on this research see: Collective behavior and options volatility smile: An agent-based explanation. Economic Modelling, 2014;39():232-239. Economic Modelling can be contacted at: Elsevier Science Bv, PO Box 211, 1000 Ae Amsterdam, Netherlands. (Elsevier - www.elsevier.com; Economic Modelling - www.elsevier.com/wps/product/cws_home/30411)

Our news correspondents report that additional information may be obtained by contacting Y.F. Liu, Univ Paris 01, CNRS, Center Econ Sorbonne, F-75231 Paris 05, France. Additional authors for this research include W. Zhang and H.C. Xu.

Keywords for this news article include: Paris, France, Europe, Economic Modelling

Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2014, NewsRx LLC


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Source: Economics Week


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