Bank of Canada adapts Black-Scholes model
A Bank of Canada Paper published this month proposes a simple methodology to build R-PDFs to show how security prices can be used effectively to extract valuable information on a wide variety of economic decisions.
The paper uses information on the market's view of the Can$/US$ exchange rate in the near future by recovering the (R-PDF) from the price of European options and extract the distribution of the underlying asset.
The author uses an adaptation of the Black-Scholes model to better
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