Can risk-neutral skewness and kurtosis subsume the information content of historical jumps?

2020 ◽  
pp. 100614
Author(s):  
Ging-Ginq Pan ◽  
Yung-Ming Shiu ◽  
Tu-Cheng Wu
Keyword(s):  
Information Content ◽  
Risk Neutral ◽  
Skewness And Kurtosis

Which One is More Important Factor for Pricing Options, Skewness or Kurtosis?

2006 ◽  
Vol 14 (2) ◽  
pp. 25-50
Author(s):  
Sol Kim
Keyword(s):  
Parametric Method ◽  
Estimation Method ◽  
Relative Importance ◽  
Pricing Options ◽  
Pricing Errors ◽  
Risk Neutral ◽  
Definition Of ◽  
Skewness And Kurtosis ◽  
Non Parametric

This paper investigates the relative importance of the skewness and kurtosis of the risk neutral distribution for pricing KOSPI200 options. The skewness and kurtosis are estimated from non parametric method of Bakshi, Kapadia, and Madan (2003) and the parametric method of Corrado and Su (1996). We show that the skewness of the risk neutral distribution is more important factor than the kurtosis irrespective of the estimation method, the definition of pricing errors, the moneyness, the type of options and a period of time.

Skewness of Kurtosis?: Using Corrado and Su (1996)‘s Model

2008 ◽  
Vol 16 (1) ◽  
pp. 1-20
Author(s):  
Sol Kim
Keyword(s):  
Options Market ◽  
Index Options ◽  
Pricing Options ◽  
Risk Neutral ◽  
Out Of Sample ◽  
S Model ◽  
Skewness And Kurtosis

For the KOSPI 200 index options market. we examine the power of influence on pricing options of the skewness and the kurtosis of the risk neutral distribution. We compare the Black and Scholes (1973) model which does not consider the skewness or the kurtosis of the risk neutral distribution with Corrado and sue 1996)’s model which consider both the skewness and the kurtosis and the models which consider only the skewness or the kurtosis. It is found that Corrado and sue 1996)‘s model which consider both skewness and kurtosis shows the best performance closely followed by the model which consider only the skewness for tile in-sample pricing and the out-of-sample pricing. As a result. it contributes to pricing options to consider both skewness and kurtosis and the skewness is more important factor for pricing options than the kurtosis.

The information content of the term structure of risk-neutral skewness

2020 ◽  
Vol 58 ◽  
pp. 247-274 ◽  
Author(s):  
Paul Borochin ◽  
Hao Chang ◽  
Yangru Wu
Keyword(s):  
Information Content ◽  
Term Structure ◽  
Risk Neutral

How Does Investor Sentiment Affect Implied Risk-Neutral Distributions of Call and Put Options?

2015 ◽  
Vol 18 (02) ◽  
pp. 1550010 ◽  
Author(s):  
Wen-Ming Szu ◽  
Yi-Chen Wang ◽  
Wan-Ru Yang
Keyword(s):  
Asset Prices ◽  
Investor Sentiment ◽  
Stock Index ◽  
Option Prices ◽  
Differential Impact ◽  
Underlying Asset ◽  
Put Options ◽  
Put Option ◽  
Risk Neutral ◽  
Skewness And Kurtosis

This paper investigates the characteristics of implied risk-neutral distributions separately derived from Taiwan stock index call and put options prices. Differences in risk-neutral skewness and kurtosis between call and put options indicate deviations from put-call parity. We find that the sentiment effect is significantly related to differences between call and put option prices. Our results suggest the differential impact of investor sentiment and consumer sentiment on call and put option traders' expectations about underlying asset prices. Moreover, rational and irrational sentiment components have different influences on call and put option traders' beliefs.

On the Usefulness of Risk-Neutral Skewness and Kurtosis for Forecasting the Higher Moments of Stock Returns

2016 ◽  
Vol 24 (2) ◽  
pp. 185-220
Author(s):  
Sol Kim
Keyword(s):  
Stock Returns ◽  
Stock Index ◽  
Higher Moments ◽  
Overlapping Data ◽  
Information Contents ◽  
Risk Neutral ◽  
Alternative Measures ◽  
Measures Of Risk ◽  
Skewness And Kurtosis

In this paper, we examine whether the risk neutral skewness and kurtosis from S&P 500 options have information for predicting the higher moments of the stock returns called skewness and kurtosis, which contain the important information for forecasting potential crash, spike upward and the fluctuations of stock index. We find that the implied risk neutral skewness and kurtosis does not provide the information contents for predicting the higher moments of S&P 500 index return, after eliminating the overlapping data. All the results are robust to the alternative measures of risk neutral moments from options prices, the sub-periods and forecasting periods.

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