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Existence of Unbiased Estimators of the Black/Scholes Option Price, Other Derivatives, and Hedge Ratios

Published online by Cambridge University Press:  11 February 2009

John L Knight  and
Stephen E. Satchell
John L Knight
Affiliation:
University of Western Ontario
Stephen E. Satchell
Affiliation:
Trinity College, and University of Cambridge
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Abstract

In this paper, we reexamine the question of statistical bias in the classic Black/Scholes option price where randomness is due to the use of the historical variance. We show that the only unbiased estimated option is an at the money option.

Type
Articles
Information
Econometric Theory , Volume 13 , Issue 6 , December 1997 , pp. 791 - 807
Copyright
Copyright © Cambridge University Press 1997

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