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Kung Ka Po (National University of Singapore, Singapore)
Index Option Pricing via Nonparametric Regression
Econometric Research in Finance, 2022, vol. 7, nr 1, s. 125-142, tab., wykr., bibliogr. 22 POZ.
Słowa kluczowe
Inwestor finansowy, Model Blacka-Scholesa, Stopa zwrotu akcji, Wycena opcji
Financial investor, Black-Scholes model, Stock rate of returns, Options pricing
JEL classification: C14, C15, G13.
Investors typically use the Black-Scholes (B-S) parametric model to value financial options. However, there is extensive empirical evidence that the B-S model, assuming constant volatility of stock returns, is far from adequate to price options. This paper, using nonparametric regression, incorporates a volatility-adjusting mechanism into the B-S model and prices options on the S&P 500 Index. Specifically, the upgraded B-S model, referred to as the B-S nonparametric model, is equipped with such a mechanism whose function is to assign larger volatilities for larger log returns and smaller volatilities for smaller log returns to characterize volatility clustering, a phenomenon such that large/small log returns tend to be followed by large/small log returns. Using the B-S nonparametric models as a yardstick, our simulation results show that, across the board, the B-S parametric model considerably overprices both call and put options.(original abstract)
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Biblioteka Szkoły Głównej Handlowej w Warszawie
Pełny tekst
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