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Modeling options markets by focusing on active tradersr
2010
Procedia Computer Science
In this work, we study the complex behavior of options markets characterized by the volatility smile phenomenon, through microsimulation (MS). We adopt two types of active traders in our MS model: speculators and arbitrageurs, and call and put options on one underlying asset. Speculators make decisions based on their expectations of the asset price at the option expiration time. Arbitrageurs trade at different arbitrage opportunities such as violation of put-call parity. Difference in liquidity
doi:10.1016/j.procs.2010.04.277
fatcat:uvx6tyt3j5dh7mkaarbeyxifxy