Optimally pricing European options with real distributions

Chieh Chung Sheng*, Hsiao Ya Chiu, An-Pin Chen

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contributionpeer-review

1 Scopus citations


Most option pricing methods use mathematical distributions to approximate underlying asset behavior. However, it is difficult to approximate the real distribution using pure mathematical distribution approaches. This study first introduces an innovative computational method of pricing European options based on the real distributions of the underlying asset. This computational approach can also be applied to expected value related applications that require real distributions rather than mathematical distributions. The contributions of this study include the following: a) it solves the risk neutral issue related to price options with real distributions, b) it proposes a simple method adjusting the standard deviation according to the practical need to apply short term volatility to real world applications and c) it demonstrates that modern databases are capable of handling large amounts of sample data to provide efficient execution speeds.

Original languageEnglish
Title of host publicationAdvances in Hybrid Information Technology - First International Conference, ICHIT 2006, Revised Selected Papers
Number of pages10
StatePublished - 1 Dec 2007
Event1st International Conference on Hybrid Information Technology, ICHIT 2006 - Jeju Island, Korea, Republic of
Duration: 9 Nov 200611 Nov 2006

Publication series

NameLecture Notes in Computer Science (including subseries Lecture Notes in Artificial Intelligence and Lecture Notes in Bioinformatics)
Volume4413 LNAI
ISSN (Print)0302-9743
ISSN (Electronic)1611-3349


Conference1st International Conference on Hybrid Information Technology, ICHIT 2006
CountryKorea, Republic of
CityJeju Island


  • Expected value application
  • Option pricing
  • Real distribution

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