An empirical comparison of the performance of alternative option pricing models
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| Formato: | Artículo científico |
| Lenguaje: | en |
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Fundación SEPI
2005
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| _version_ | 1876439107465379840 |
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| author | Eva Ferreira |
| author_facet | Eva Ferreira |
| contents | An empirical comparison of the performance of alternative option pricing models Eva Ferreira Mónica Gago Ángel León Gonzalo Rubio Economía y Finanzas hedging liquidity Option pricing net buying pressure conditional volatility This paper presents a comparison of alternative option pricing models basedneither on jump-di��usion nor stochastic volatility data generating processes.We assume either a smooth volatility function of some previously defined explanatoryvariables or a model in which discrete-based observations can beemployed to estimate both path-dependence volatility and the negative correlationbetween volatility and underlying returns. Moreover, we also allowfor liquidity frictions to recognize that underlying markets may not be fullyintegrated. The simplest models tend to present a superior out-of sample performanceand a better hedging ability, although the model with liquidity costsseems to display better in-sample behavior. However, none of the modelsseems to be able to capture the rapidly changing distribution of the underlyingindex return or the net buying pressure characterizing option markets. 2005 artículo científico 0210-1521 https://www.redalyc.org/articulo.oa?id=17329303 en http://www.redalyc.org/revista.oa?id=173 Investigaciones Económicas application/pdf Fundación SEPI Investigaciones Económicas (España) Num.3 Vol.XXIX |
| format | Artículo científico |
| id | redalyc_17329303 |
| institution | Redalyc |
| language | en |
| publishDate | 2005 |
| publisher | Fundación SEPI |
| spellingShingle | An empirical comparison of the performance of alternative option pricing models Eva Ferreira Economía y Finanzas hedging liquidity Option pricing net buying pressure conditional volatility An empirical comparison of the performance of alternative option pricing models Eva Ferreira Mónica Gago Ángel León Gonzalo Rubio Economía y Finanzas hedging liquidity Option pricing net buying pressure conditional volatility This paper presents a comparison of alternative option pricing models basedneither on jump-di��usion nor stochastic volatility data generating processes.We assume either a smooth volatility function of some previously defined explanatoryvariables or a model in which discrete-based observations can beemployed to estimate both path-dependence volatility and the negative correlationbetween volatility and underlying returns. Moreover, we also allowfor liquidity frictions to recognize that underlying markets may not be fullyintegrated. The simplest models tend to present a superior out-of sample performanceand a better hedging ability, although the model with liquidity costsseems to display better in-sample behavior. However, none of the modelsseems to be able to capture the rapidly changing distribution of the underlyingindex return or the net buying pressure characterizing option markets. 2005 artículo científico 0210-1521 https://www.redalyc.org/articulo.oa?id=17329303 en http://www.redalyc.org/revista.oa?id=173 Investigaciones Económicas application/pdf Fundación SEPI Investigaciones Económicas (España) Num.3 Vol.XXIX |
| title | An empirical comparison of the performance of alternative option pricing models |
| topic | Economía y Finanzas hedging liquidity Option pricing net buying pressure conditional volatility |
| url | https://www.redalyc.org/articulo.oa?id=17329303 |