Empirical performance of alternative option pricing models

• 成果类型: Article
• 署名作者: Bakshi, G; Cao, C; Chen, ZW
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park; University System of Ohio; Ohio State University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.1997.tb02749.x
• 发表日期: 1997
• 页码: 2003-2049
• 关键词: FOREIGN-CURRENCY OPTIONS; stochastic volatility; heteroskedasticity; valuation; MARKETS; VALUES; tests

摘要

Substantial progress has been made in developing more realistic option pricing models. Empirically, however, it is not known whether and by-how much each generalization improves option pricing and hedging. We fill this gap by first deriving an option model that allows volatility, interest rates and jumps' to be stochastic. Using S&P 500 options, we examine several alternative models from three perspectives: (1) internal consistency of implied parameters/volatility with relevant time-series data, (2) out-of-sample pricing, and (3) hedging. Overall, incorporating stochastic volatility and jumps is important for pricing and internal consistency. But for hedging, modeling stochastic volatility alone yields the best performance.