Banque de France

The Banque de France Financial Stability Review • Valuation and fi nancial stability • October 2008 40
According to traditional option pricing models,2 fi nancial markets underestimate the impact of tail risk.
In this article, we put forward a European option pricing model based on a set of assumptions that
,
inter alia, that extreme events are [...]

The Banque de France The Financial Stability Review Valuation and fi nancial stability • October 2008 24
Valuation and fundamentals
LAURENT CLERC
Deputy Director, Financial Stability Directorate
Banque de France
NB: This article was written Laurent Clerc (Financial Stability Directorate), with contributions from Nathalie Beaudemoulin (General Banking System Supervision
Directorate of the General Secretariat of the Commission bancaire), Cédric Jacquat [...]