Empirical study based on the model of rough fractional stochastic volatility (RFSV)

2021 ◽  
Author(s):  
Songyan Zhang ◽  
Chaoyong Hu
Keyword(s):  
Monte Carlo Simulation ◽  
Option Pricing ◽  
Stochastic Volatility ◽  
Option Price ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model ◽  
Research Findings ◽  
S Model ◽  
The Empirical Analysis

To estimate the parameters of the model of option pricing based on the model of rough fractional stochastic volatility (RFSV), we have carried out the empirical analysis during our study on the pricing of SSE 50ETF options in China. First, we have estimated the parameters of option pricing model by adopting the Monte Carlo simulation. Subsequently, we have empirically examined the pricing performance of the RFSV model by adopting the SSE 50ETF option price from January 2019 to December 2020. Our research findings indicate that by leveraging the RFSV model, we are able to attain a more accurate and stable level of option pricing than the conventional Black–Scholes (B-S) model on constant volatility. The errors of option pricing incurred by the B-S model proved to be larger and exhibited higher volatility, revealing the significant impact imposed by stochastic volatility on option pricing.

scholarly journals Nonparametric Estimation of Fractional Option Pricing Model

2020 ◽  
Vol 2020 ◽  
pp. 1-8
Author(s):  
Qing Li ◽  
Songlin Liu ◽  
Misi Zhou
Keyword(s):  
Option Pricing ◽  
Stock Exchange ◽  
Option Price ◽  
Integral Function ◽  
The State ◽  
Pricing Model ◽  
State Price ◽  
Black Scholes ◽  
Option Pricing Model ◽  
State Price Density

The establishment of the fractional Black–Scholes option pricing model is under a major condition with the normal distribution for the state price density (SPD) function. However, the fractional Brownian motion is deemed to not be martingale with a long memory effect of the underlying asset, so that the estimation of the state price density (SPD) function is far from simple. This paper proposes a convenient approach to get the fractional option pricing model by changing variables. Further, the option price is transformed as the integral function of the cumulative density function (CDF), so it is not necessary to estimate the distribution function individually by complex approaches. Finally, it encourages to estimate the fractional option pricing model by the way of nonparametric regression and makes empirical analysis with the traded 50 ETF option data in Shanghai Stock Exchange (SSE).

scholarly journals Valuing Coca-Cola And PepsiCo Options Using The Black-Scholes Option Pricing Model And Data Downloads From The Internet

2012 ◽  
Vol 8 (6) ◽  
pp. 559-564
Author(s):  
John C. Gardner ◽  
Carl B. McGowan Jr
Keyword(s):  
Option Pricing ◽  
Stock Price ◽  
Option Price ◽  
Option Prices ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model ◽  
Risk Free Rate ◽  
Daily Returns ◽  
Free Rate

In this paper, we demonstrate how to collect the data and compute the actual value of Black-Scholes Option Pricing Model call option prices for Coca-Cola and PepsiCo.The data for the current stock price and option price are taken from Yahoo Finance and the daily returns variance is computed from daily prices.The time to maturity is computed as the number of days remaining for the stock option.The risk-free rate is obtained from the U.S. Treasury website.

An Empirical Test of the Black-Scholes Option Pricing Model and the Implied Variance: A Confidence Interval Approach

1987 ◽  
Vol 2 (4) ◽  
pp. 355-369 ◽  
Author(s):  
Haim Levy ◽  
Young Hoon Byun
Keyword(s):  
Confidence Interval ◽  
Option Pricing ◽  
Implied Volatility ◽  
Empirical Test ◽  
Market Price ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model ◽  
S Model ◽  
Over Time

The empirical studies on the Black-Scholes (B-S) option pricing model have reported that the model tends to exhibit systematic biases with respect to the exercise price, time to expiration, and the stock's volatility. This paper attempts to test the B-S model with a new approach: derive the confidence interval of the model call option value based on the confidence interval of the. estimated variance. The test reports that even when the variance's confidence interval is considered, a systematic deviation between the theoretical “range” of the option price values and the observed market price still exist. If the stock variance is constant over time, the interpretation of the results is that the B-S model is wrong. However, if stock variance changes over time, the interpretation of the results is that the implied volatility in options market prices had a tendency to be significantly higher than the estimate that could have been obtained from historical data.

scholarly journals A Comparison of the Black-Scholes Option Pricing Model and Its Alternatives

2019 ◽  
Vol 67 (2) ◽  
pp. 105-110
Author(s):  
ABM Shahadat Hossain ◽  
Maliha Tasmiah Noushin ◽  
Kamrul Hasan
Keyword(s):  
Option Pricing ◽  
Option Price ◽  
Pricing Model ◽  
Cev Model ◽  
Constant Elasticity ◽  
Constant Elasticity Of Variance ◽  
Elasticity Parameter ◽  
Put Option ◽  
Black Scholes ◽  
Option Pricing Model

In this paper we estimate European put option price by using awell-established option pricing model, namely, the Constant Elasticity of Variance (CEV) model for the elasticity parameter β< 2 and then compare it with the benchmark Black-Scholes (BS) model. We calculate the Greeks under the CEV model for β=0,1 and 1.95 and compare them with that of the B-S one. Finally, we investigate the put price and Greeks values for at-the-money (ATM), in-the-money (ITM) and out-of-the-money (OTM) situations. Dhaka Univ. J. Sci. 67(2): 105-110, 2019 (July)

scholarly journals Empirical Performance of Black-Scholes and GARCH Option Pricing Models during Turbulent Times: The Indian Evidence

2016 ◽  
Vol 8 (3) ◽  
pp. 123
Author(s):  
Aparna Bhat ◽  
Kirti Arekar
Keyword(s):  
Option Pricing ◽  
Closed Form Solution ◽  
Time Varying ◽  
Pricing Model ◽  
Currency Options ◽  
Pricing Models ◽  
Pricing Options ◽  
Volatility Model ◽  
Black Scholes ◽  
Option Pricing Model

Exchange-traded currency options are a recent innovation in the Indian financial market and their pricing is as yet unexplored. The objective of this research paper is to empirically compare the pricing performance of two well-known option pricing models – the Black-Scholes-Merton Option Pricing Model (BSM) and Duan’s NGARCH option pricing model – for pricing exchange-traded currency options on the US dollar-Indian rupee during a recent turbulent period. The BSM is known to systematically misprice options on the same underlying asset but with different strike prices and maturities resulting in the phenomenon of the ‘volatility smile’. This bias of the BSM results from its assumption of a constant volatility over the option’s life. The NGARCH option pricing model developed by Duan is an attempt to incorporate time-varying volatility in pricing options. It is a deterministic volatility model which has no closed-form solution and therefore requires numerical techniques for evaluation. In this paper we have compared the pricing performance and examined the pricing bias of both models during a recent period of volatility in the Indian foreign exchange market. Contrary to our expectations the pricing performance of the more sophisticated NGARCH pricing model is inferior to that of the relatively simple BSM model. However orthogonality tests demonstrate that the NGARCH model is free of the strike price and maturity biases associated with the BSM. We conclude that the deterministic BSM does a better job of pricing options than the more advanced time-varying volatility model based on GARCH.

Predicting the stock price of frontier markets using machine learning and modified Black–Scholes Option pricing model

2020 ◽  
Vol 555 ◽  
pp. 124444 ◽  
Author(s):  
Reaz Chowdhury ◽  
M.R.C. Mahdy ◽  
Tanisha Nourin Alam ◽  
Golam Dastegir Al Quaderi ◽  
M. Arifur Rahman
Keyword(s):  
Machine Learning ◽  
Option Pricing ◽  
Stock Price ◽  
Pricing Model ◽  
Black Scholes ◽  
Option Pricing Model
Sign in / Sign up

Export Citation Format

Share Document