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Investigations into Alternative Sources of Disturbance and Bias in the Implied Volatility Surface

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Author: Byler, Daniel M.
Advisor: Moody, Carlisle E., Jr., 1943-
Committee Members: Dessler, David; Pereira, Alfredo
Issued Date: 2009-05-14
Subjects: Options Pricing
Technical Analysis
Implied Volatility
Double Tops
Kernel Smoothing
Double Bottoms
URI: http://hdl.handle.net/10288/1212
Description: This paper demonstrates that crude estimators can correctly identify statistically significant technical patterns in major index data. The introduction of intra-day prices significantly improves a crude estimators' ability to identify technical barriers. Double tops are associated with increases in the prices of puts which indicates that supply and demand dynamics may impact options prices in ways not previously examined. Moreover, this may be a step in the right direction of identifying the supply and demand identification in options markets. Following in line with other work, this is in no way negates the Black-Scholes-Merton delta hedging instantaneous replication argument. It simply demonstrates that the Black-Scholes-Merton approach offers a very powerful but incomplete theory of options pricing.
Degree: Bachelors of Arts in Economics

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