Author: Olesia VerchenkoPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
Empirical Tests of Option Pricing Models
Author: Olesia VerchenkoOption Pricing
Author: Richard V. StetiuMicrostructural Biases in Empirical Tests of Option Pricing Models
Author: Patrick J. DennisPublisher:
ISBN:
Category :
Languages : en
Pages : 42
Book Description
This paper examines how noise in observed option prices arising from discrete prices and other microstructural frictions affects empirical tests of option models and risk-neutral density estimation. The discrete tick size alone introduces enough noise to make model comparisons difficult, especially for lower-priced stocks. We demonstrate that microstructural noise can lead to incorrect inferences in the univariate diffusion test of Bakshi, Cao, and Chen (2000), the transition density diffusion test of Ait-Sahalia (2002), and the speed-of-convergence test of Carr and Wu (2003). We also show that microstructural noise induces a bias into the implied risk-neutral moment estimators of Bakshi, Kapadia, and Madan (2003). Even in active, liquid option markets, observation error is likely to reduce significantly the power of tests, and in some cases represents an important source of bias.
An Update on the Empirical Tests of the Black-Scholes-Merton, Modified Black-Scholes and Roll-Geske-Whaley Option Pricing Models
Author: John Michael BucciMartingale Restriction in Option Pricing Models: Empirical Tests
Author: Chryso Costa NathanielOption Pricing Model Under Volatility Smile-empirically [i.e. Smile-empirical] Test on S & P 500 Options
![Option Pricing Model Under Volatility Smile-empirically [i.e. Smile-empirical] Test on S & P 500 Options PDF](https://books.google.com/books/content/images/frontcover/v7nJNwAACAAJ?fife=w80-h100)
Author: Vincent Hung-Ping ChangPublisher:
ISBN:
Category :
Languages : en
Pages : 134
Book Description
Empirical Performance Study of Alternative Option Pricing Models
Author: Sofiane AbouraPublisher:
ISBN:
Category :
Languages : en
Pages :
Book Description
The mispricing of the deep-in-the money and deep-out-the-money generated by the Black-Scholes (1973) model is now well documented in the literature. In this paper, we discuss different option valuation models on the basis of empirical tests carry out on the French option market. We examine methods that account for non-normal skewness and kurtosis, relax the martingale restriction, mix two log-normal distributions, and allows either for jump diffusion process or for stochastic volatility. We find that the use of a jump diffusion and stochastic volatility model performs as well as the inclusion of non normal skewness and kurtosis in terms of precision in the option valuation.Keywords : Implied Volatility, Stochastic Volatility Model, Jump Diffusion Model, Skewness, Kurtosis.
The Black-Scholes Call Option Pricing Model and Tests of the Model
Author: Susumu UenoPublisher:
ISBN:
Category :
Languages : en
Pages : 11
Book Description
This paper aims to examine the theory behind the Black-Scholes call option pricing model, which has been widely used by those who deal with options to search for situations where the market price of an option differs substantially from the fair value. The empirical test of the option pricing model conducted by Black-Scholes (1972) is also reviewed in this paper. Since the test was done prior to the listed trading and is the earliest one, it seems to be outdated. A number of later empirical tests of the Black-Scholes model have shown that the model is highly successful in explaining the observed market price of options. However, the investigation of the earliest test is very meaningful in itself.
An empirical test of the Black and Scholes option pricing model
Author: Bradley David SvalbergPublisher:
ISBN:
Category : Option (Contract)
Languages : en
Pages : 106
Book Description
Author: Sichong Chen