Empirical Performance Study of Alternative Option Pricing Models
Author | : Sofiane Aboura |
Publisher | : |
Total Pages | : |
Release | : 2015 |
ISBN-10 | : OCLC:1290219249 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Empirical Performance Study of Alternative Option Pricing Models written by Sofiane Aboura and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.