Specification analysis of option pricing models based on time-changed Levy processes

• 成果类型: Article
• 署名作者: Huang, JZ; Wu, LR
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; City University of New York (CUNY) System; Baruch College (CUNY)
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2004.00667.x
• 发表日期: 2004
• 页码: 1405-1439
• 关键词: stochastic volatility; term structure; stock-prices; jump; implicit; RISK; heteroskedasticity; returns

摘要

We analyze the specifications of option pricing models based on time-changed Levy processes. We classify option pricing models based on the structure of the jump component in the underlying return process, the source of stochastic volatility, and the specification of the volatility process itself. Our estimation of a variety of model specifications indicates that to better capture the behavior of the S&P 500 index options, we need to incorporate a high frequency jump component in the return process and generate stochastic volatilities from two different sources, the jump component and the diffusion component.