Option Pricing by Students and Professional Traders: A Behavioural Investigation

@inproceedings{Abbink2006OptionPB,
  title={Option Pricing by Students and Professional Traders: A Behavioural Investigation},
  author={Klaus Abbink and Bettina Rockenbach},
  year={2006}
}
We compare the behaviour of students and professional traders from an influential German bank in an experiment involving financial options. The arbitrage free option price is independent of the probability distribution of the underlying asset. The experimental data uncover a probability dependent option valuation of the students, however, they learn to exploit more arbitrage as they gain experience. The professional traders exhibit a less probability sensitive valuation, but their overall… CONTINUE READING

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