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Author : Sichong Chen
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (643 download)
Download or read book Empirical Test of Option Pricing Models with Stochastic Volatility in S & P 5oo Futures Options written by Sichong Chen and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : David S. Bates
Publisher :
ISBN 13 :
Total Pages : 75 pages
Book Rating : 4.:/5 (129 download)
Download or read book Testing Option Pricing Models written by David S. Bates and published by . This book was released on 2010 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the commonly used methods for testing option pricing models, including the Black-Scholes, constant elasticity of variance, stochastic volatility, and jump-diffusion models. Since options are derivative assets, the central empirical issue is whether the distributions implicit in option prices are consistent with the time series properties of the underlying asset prices. Three relevant aspects of consistency are discussed, corresponding to whether time series-based inferences and option prices agree with respect to volatility, changes in volatility, and higher moments. The paper surveys the extensive empirical literature on stock options, options on stock indexes and stock index futures, and options on currencies and currency futures.
Author : Greg Orosi
Publisher :
ISBN 13 :
Total Pages : 16 pages
Book Rating : 4.:/5 (13 download)
Download or read book Empirical Performance of Option Pricing Models with Stochastic Local Volatility written by Greg Orosi and published by . This book was released on 2014 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the empirical performance of several stochastic local volatility models that are the extensions of the Heston stochastic volatility model. Our results indicate that the stochastic volatility model with quadratic local volatility significantly outperforms the stochastic volatility model with CEV type local volatility. Moreover, we compare the performance of these models to several other benchmarks and find that the quadratic local volatility model compares well to the best performing option pricing models reported in the current literature for European-style S&P500 index options. Our results also indicate that the model with quadratic local volatility reproduces the characteristics of the implied volatility surface more accurately than the Heston model. Finally, we demonstrate that capturing the shape of the implied volatility surface is necessary to price binary options accurately.
Author : David S. Bates
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (129 download)
Download or read book Empirical Option Pricing Models written by David S. Bates and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is an overview of empirical options research, with primary emphasis on research into systematic stochastic volatility and jump risks relevant for pricing stock index options. The paper reviews evidence from time series analysis, option prices and option price evolution regarding those risks, and discusses required compensation.
Author : David Scott Bates
Publisher :
ISBN 13 :
Total Pages : 72 pages
Book Rating : 4.:/5 (326 download)
Download or read book Testing Option Pricing Models written by David Scott Bates and published by . This book was released on 1995 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the commonly used methods for testing option pricing models, including the Black-Scholes, constant elasticity of variance, stochastic volatility, and jump-diffusion models. Since options are derivative assets, the central empirical issue is whether the distributions implicit in option prices are consistent with the time series properties of the underlying asset prices. Three relevant aspects of consistency are discussed, corresponding to whether time series-based inferences and option prices agree with respect to volatility, changes in volatility, and higher moments. The paper surveys the extensive empirical literature on stock options, options on stock indexes and stock index futures, and options on currencies and currency futures
Author : Tiezhu Gao
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (11 download)
Download or read book An Empirical Comparison of Alternative Stochastic Volatility Option Pricing Models written by Tiezhu Gao and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this thesis, I empirically compare the pricing performance of three classes of stochastic volatility option pricing models and the traditional Black-Scholes (1973) model in the pricing of S & P Canada 60 Index Options. The stochastic volatility models that I study are as follows: (1) the ad hoc Black and Scholes (1973) procedure that fits the implied volatility surface, (2) Madan et al.'s (1998) variance gamma model, and (3) Heston's (1993) continuous-time stochastic volatility model. I find that Heston's continuous-time stochastic volatility model outperforms the other models in terms of in-sample pricing and out-of-sample pricing. Second, the addition of the stochastic volatility term to the stochastic volatility model and variance gamma model does not resolve the "volatility smiles" effects, but it reduces the effects. Third, the Black-Scholes model performs adequately in pricing options, with the advantage of simplicity, although it suffers from the shortcoming of the "volatility smiles" effect. Finally, although it includes more parameters, the ad hoc Black and Scholes model does not perform as well as expected.
Author : Minqiang Li
Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (129 download)
Download or read book A 'Horse Race' Among Competing Option Pricing Models Using S&P 500 Index Options written by Minqiang Li and published by . This book was released on 2008 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The last three decades have witnessed a whole array of option pricing models. We compare the predictive performances of a selection of models by carrying out a horse race on Samp;P 500 index options along the lines of Jackwerth and Rubinstein (2001). The models we consider include: Black-Scholes, trader rules, Heston's stochastic volatility model, Merton's jump diffusion models with and without stochastic volatility, and more recent Levy type models. Trader rules still dominate mathematically more sophisticated models, and the performance of the trader rules is further improved by incorporating the stable index skew pattern documented in Li and Pearson (2005). Furthermore, after incorporating the stable index skew pattern, the Black-Scholes model beats all mathematically more sophisticated models in almost all cases. Mathematically more sophisticated models vary in their overall performance and their relative accuracy in forecasting future volatility levels and future volatility skew shapes.
Author : Christos Christitsas
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (642 download)
Download or read book Extracting Market Expectations from Traded Option Prices: an Empirical Test of the Stochastic Volatility Model on FTSE 100 Index Options written by Christos Christitsas and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jun Yue
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (139 download)
Download or read book Volatility Models in Option Pricing with Empirical Analysis in The Chinese Market written by Jun Yue and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Nowadays, financial derivatives play an increasingly important role in the global financial system, and options are popular structural financial derivatives, which attract much attention from academia and the industry. China Financial Futures Exchange (CFFEX) initiated the CSI 1000 index future and CSI 1000 index option in the Chinese market on July 22, 2022, which indicates a trend of acceleration in financial innovations in China's financial market. This dissertation focuses on the volatility models in option pricing and modern numerical procedures that approximate option prices. In this dissertation, different stochastic volatility models, for example, the Black-Scholes model and the Heston stochastic volatility model, are introduced and applied to price in not only European options but also exotic options, which possess complicated payoff structures. Moreover, a comprehensive empirical analysis is conducted to demonstrate these option pricing algorithms based on the recent data of CSI 1000 index options in the Chinese market.
Author : Maria Cristina Recchioni
Publisher :
ISBN 13 :
Total Pages : 38 pages
Book Rating : 4.:/5 (13 download)
Download or read book Can Negative Interest Rates Really Affect Option Pricing? Empirical Evidence from an Explicitly Solvable Stochastic Volatility Model written by Maria Cristina Recchioni and published by . This book was released on 2016 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: The profound financial crisis generated by the collapse of Lehman Brothers and the European sovereign debt crisis in 2011 have caused negative values of government bond yields both in the U.S.A. and in the EURO area. This paper investigates whether the use of models which allow for negative interest rate can improve option pricing and implied volatility forecasting. This is done with special attention to Foreign eXchange and index options. To this end, we carried out an empirical analysis of the prices of call and put options on the U.S. S&P 500 index as well as on the Eurodollar futures using a generalization of the Heston model in the stochastic interest rate framework. Specifically, the dynamics of the option's underlying asset is described by two factors: a stochastic variance and a stochastic interest rate. The volatility is not allowed to be negative while the interest rate is. Explicit formulas for the transition probability density function and moments are derived. These formulas are used to efficiently estimate the model parameters. Three empirical analyses are illustrated. The first two show that the use of models which allow for negative interest rates can efficiently reproduce implied volatility and forecast option prices (i.e. S&P index and foreign exchange options). The last one studies how the U.S. three month government bond yield affects the U.S. S&P 500 index.
Author : Nazibrola Lordkipanidze
Publisher :
ISBN 13 :
Total Pages : 296 pages
Book Rating : 4.E/5 ( download)
Download or read book Modeling and Estimation of Long-memory in Stochastic Volatility written by Nazibrola Lordkipanidze and published by . This book was released on 2004 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt:
![Download Option Pricing Model Under Volatility Smile-empirically [i.e. Smile-empirical] Test on S & P 500 Options PDF Online Free](https://books.google.com/books/content/images/frontcover/v7nJNwAACAAJ?fife=w200-h370)
Author : Vincent Hung-Ping Chang
Publisher :
ISBN 13 :
Total Pages : 134 pages
Book Rating : 4.:/5 (444 download)
Download or read book Option Pricing Model Under Volatility Smile-empirically [i.e. Smile-empirical] Test on S & P 500 Options written by Vincent Hung-Ping Chang and published by . This book was released on 2000 with total page 134 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Pascal Debus
Publisher :
ISBN 13 : 9783656492559
Total Pages : 60 pages
Book Rating : 4.4/5 (925 download)
Download or read book Application of Stochastic Volatility Models in Option Pricing written by Pascal Debus and published by . This book was released on 2013 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelorarbeit aus dem Jahr 2010 im Fachbereich BWL - Investition und Finanzierung, Note: 1,2, EBS Universitat fur Wirtschaft und Recht, Sprache: Deutsch, Abstract: The Black-Scholes (or Black-Scholes-Merton) Model has become the standard model for the pricing of options and can surely be seen as one of the main reasons for the growth of the derivative market after the models introduction in 1973. As a consequence, the inventors of the model, Robert Merton, Myron Scholes, and without doubt also Fischer Black, if he had not died in 1995, were awarded the Nobel prize for economics in 1997. The model, however, makes some strict assumptions that must hold true for accurate pricing of an option. The most important one is constant volatility, whereas empirical evidence shows that volatility is heteroscedastic. This leads to increased mispricing of options especially in the case of out of the money options as well as to a phenomenon known as volatility smile. As a consequence, researchers introduced various approaches to expand the model by allowing the volatility to be non-constant and to follow a sto-chastic process. It is the objective of this thesis to investigate if the pricing accuracy of the Black-Scholes model can be significantly improved by applying a stochastic volatility model.
Author : Jaesun Noh
Publisher :
ISBN 13 :
Total Pages : 48 pages
Book Rating : 4.0/5 ( download)
Download or read book A Test of Efficiency for the S & P 500 Index Option Market Using Variance Forecasts written by Jaesun Noh and published by . This book was released on 1993 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: To forecast future option prices, autoregressive models of implied volatility derived from observed option prices are commonly employed [see Day and Lewis (1990), and Harvey and Whaley (1992)]. In contrast, the ARCH model proposed by Engle (1982) models the dynamic behavior in volatility, forecasting future volatility using only the return series of an asset. We assess the performance of these two volatility prediction models from S&P 500 index options market data over the period from September 1986 to December 1991 by employing two agents who trade straddles, each using one of the two different methods of forecast. Straddle trading is employed since a straddle does not need to be hedged. Each agent prices options according to her chosen method of forecast, buying (selling) straddles when her forecast price for tomorrow is higher (lower) than today's market closing price, and at the end of each day the rates of return are computed. We find that the agent using the GARCH forecast method earns greater profit than the agent who uses the implied volatility regression (IVR) forecast model. In particular, the agent using the GARCH forecast method earns a profit in excess of a cost of $0.25 per straddle with the near-the-money straddle trading.
Author : Peter Christoffersen
Publisher :
ISBN 13 :
Total Pages : 39 pages
Book Rating : 4.:/5 (129 download)
Download or read book Models for S&P 500 Dynamics written by Peter Christoffersen and published by . This book was released on 2009 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most recent empirical option valuation studies build on the affine square root (SQR) stochastic volatility model. The SQR model is a convenient choice, because it yields closed-form solutions for option prices. However, relatively little is known about the resulting biases. We investigate alternatives to the SQR model, by comparing its empirical performance with that of five different but equally parsimonious stochastic volatility models. We provide empirical evidence from three different sources. We first use realized volatilities to assess the properties of the SQR model and to guide us in the search for alternative specifications. We then estimate the models using maximum likelihood on Samp;P 500 returns. Finally, we employ nonlinear least squares on a panel of option data. In comparison with earlier studies that explicitly solve the filtering problem, we analyze a more comprehensive option data set. The scope of our analysis is feasible because of our use of the particle filter. The three sources of data we employ all point to the same conclusion: the SQR model is misspecified. Overall, the best of the alternative volatility specifications is a model with linear rather than square root diffusion for variance which we refer to as the VAR model. This model captures the stylized facts in realized volatilities, it performs well in fitting various samples of index returns, and it has the lowest option implied volatility mean squared errors in- and out-of-sample.
Author : Wee Liam Goh
Publisher :
ISBN 13 :
Total Pages : 53 pages
Book Rating : 4.:/5 (58 download)
Download or read book Empirical Test of the Black-scholes Option Pricing Model on the Nikkel-225 Futures Options written by Wee Liam Goh and published by . This book was released on 1996 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Sofiane Aboura
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
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.
