scholarly journals Are Classical Option Pricing Models Consistent with Observed Option Second-Order Moments? Evidence from High-Frequency Data

2013 ◽  
Author(s):  
Francesco Audrino ◽  
Matthias R. Fengler
Keyword(s):  
Option Pricing ◽  
High Frequency ◽  
Second Order ◽  
High Frequency Data ◽  
Frequency Data ◽  
Pricing Models

scholarly journals Predictive accuracy of option pricing models considering high-frequency data

2021 ◽  
Vol 34 (1) ◽  
pp. 131-144
Author(s):  
Josip Arnerić ◽  
Maria Čuljak
Keyword(s):  
Option Pricing ◽  
Probability Density ◽  
Density Function ◽  
High Frequency ◽  
Predictive Accuracy ◽  
High Frequency Data ◽  
Frequency Data ◽  
True Density ◽  
Pricing Models ◽  
Out Of Sample

Purpose: Recently, considerable attention has been given to forecasting, not only the mean and the variance, but also the entire probability density function (pdf) of the underlying asset. These forecasts can be obtained as implied moments of future distribution originating from European call and put options. However, the predictive accuracy of option pricing models is not so well established. With this in mind, this research aims to identify the model that predicts the entire pdf most accurately when compared to the ex-post “true” density given by high-frequency data at expiration date. Methodology: The methodological part includes two steps. In the first step, several probability density functions are estimated using different option pricing models, considering the values of major market indices with different maturities. These implied probability density functions are risk neutral. In the second step, the implied pdfs are compared against the “true” density obtained from the high-frequency data to examine which one gives the best fit out-of-sample. Results: The results support the idea that a “true” density function, although unknown, can be estimated by employing the kernel estimator within high-frequency data and adjusted for risk preferences. Conclusion: The main conclusion is that the Shimko model outperforms the Mixture Log-Normal model as well as the Edgeworth expansion model in terms of out-of-sample forecasting accuracy. This study contributes to the existing body of research by: i) establishing the benchmark of the “true” density function using high-frequency data, ii) determining the predictive accuracy of the option pricing models and iii) providing applicative results both for market participants and public authorities.

scholarly journals An Option Pricing Model Using High Frequency Data

2016 ◽  
Vol 91 ◽  
pp. 175-179
Author(s):  
Saebom Jeon ◽  
Won Chang ◽  
Yousung Park
Keyword(s):  
Option Pricing ◽  
High Frequency ◽  
High Frequency Data ◽  
Frequency Data ◽  
Pricing Model ◽  
Option Pricing Model

NONPARAMETRIC ESTIMATION FOR SECOND-ORDER JUMP-DIFFUSION MODEL IN HIGH FREQUENCY DATA

2017 ◽  
Vol 65 (04) ◽  
pp. 1033-1063 ◽  
Author(s):  
YUPING SONG
Keyword(s):  
High Frequency ◽  
Jump Diffusion ◽  
Small Sample ◽  
Second Order ◽  
Stock Index ◽  
High Frequency Data ◽  
Monte Carlo Experiment ◽  
Frequency Data ◽  
Sample Paths ◽  
Jump Diffusion Model

We provide the nonparametric estimators of the infinitesimal coefficients of the second-order continuous-time models with discontinuous sample paths of jump-diffusion models. Under the mild conditions, we obtain the weak consistency and the asymptotic normality of the estimators. A Monte Carlo experiment demonstrates the better small-sample performance of these estimators. In addition, the estimators are illustrated empirically through stock index of Shanghai Stock Exchange in high frequency data.

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