Prospect theory: An application to European option pricing
Part of book or chapter of book, Preprint
- Publisher: Ca' Foscari University of Venice, Department of Economics
Behavioral Finance, Cumulative Prospect Theory, European Option Pricing. | Behavioral Finance; Cumulative Prospect Theory; European Option Pricing
Empirical studies on quoted options highlight deviations from the theoretical model of Black and Scholes; this is due to different causes, such as assumptions regarding the price dynamics, markets frictions and investors' attitude toward risk. In this contribution, we f...