Download or read book An Investigation of the Relative Effects of Specification and Estimation Errors on Estimates of Option Prices Generated by Two Competing Models microform written by Alam, A. K. M. Shamsul and published by National Library of Canada. This book was released on 1986 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Dissertation Abstracts International written by and published by . This book was released on 2002 with total page 548 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Impact of Estimation Errors on the Option Pricing written by Patrycja Przytula and published by LAP Lambert Academic Publishing. This book was released on 2011-02 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Normal Inverse Gaussian distribution is used as a model of logarithmic returns of index values. We use the Esscher transform and the Black Scholes formula for the option pricing. The calibration of the distribution parameters afects the calculated prices of the European call options. The basic idea is to use a point estimation and its standard errors and then test combinations when the standard errors are added or subtracted to the point estimates. The study is applied to two indexes of the OMX Nordic Market, the OMXS30 and OMXC20. Our results on these indexes show that the parameter which in uences the option price mostly is the peakeness of the NIG distribution. The skewness parameter has the least in uence on the pricing. The option prices based on the NIG and Esscher transform are also compared with the pricing by using Black-Scholes formula and the market prices. The results show that for the OMXS30 index the NIG assumption and the Esscher transform provide calculated prices which are closer to the market prices that the Black-Scholes prices. For the OMXC20 we obtained contrary results.
Download or read book A Semiparametric Estimation of Liquidity Effects on Option Pricing written by Eva Ferreira and published by . This book was released on 1999 with total page 116 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Specification Tests of Calibrated Option Pricing Models written by Robert A. Jarrow and published by . This book was released on 2013 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: In spite of the popularity of model calibration in finance, empirical researchers have put more emphasis on model estimation than on the equally important goodness-of-fit problem. This is due partly to the ignorance of modelers, and more to the ability of existing statistical tests to detect specification errors. In practice, models are often calibrated by minimizing the sum of squared difference between the modelled and actual observations. It is challenging to disentangle model error from estimation error in the residual series. To circumvent the difficulty, we study an alternative way of estimating the model by exact calibration. We argue that standard time series tests based on the exact approach can better reveal model misspecifications than the error minimizing approach. In the context of option pricing, we illustrate the usefulness of exact calibration in detecting model misspecification. Under heteroskedastic observation error structure, our simulation results shows that the Black-Scholes model calibrated by exact approach delivers more accurate hedging performance than that calibrated by error minimization.
Download or read book The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns Classic Reprint written by Robert C. Merton and published by Forgotten Books. This book was released on 2016-12-06 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns At the heart of the derivation of the black-scholes option pricing formula is the arbitrage technique by which investors can follow a dynamic portfolio strategy using the stock and riskless borrowing t0'exactly repro duce the return structure of an option. By following this strategy in com bination with a short position in an option, the investor can eliminate all risk from the total position, and hence to avoid arbitrage opportunities. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Download or read book Estimating and Testing Option Pricing Models in an Economy with Transaction Costs written by Hyoung-jin Park and published by . This book was released on 2008 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effect of transaction costs on implied volatility structure, parameter estimation, and hedging. Using simulations, we document that: (1) Transaction costs can generate the volatility smile phenomena even in the Black-Scholes economy. Especially, volatility smile effect is very strong for short-term options and it disappears as the maturity of options becomes longer. (2) Transaction costs cannot reject the true model falsely. All the parameter values that are supposed to be zero are not statistically significant even in the presence of transaction costs. (3) In hedging, the Black-Scholes model performs better than any other model in any case. This may result from the parameter instability of the cross-sectional estimation method.
Download or read book Empirical Studies of Alternative Option Pricing Models written by Constant Eduard Beckers and published by . This book was released on 1979 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Estimating Option Pricing Models Using a Characteristic Function based Linear State Space Representation written by Herman Peter Boswijk and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a novel filtering and estimation procedure for parametric option pricing models driven by general affine jump-diffusions. Our procedure is based on the comparison between an option-implied, model-free representation of the conditional log-characteristic function and the model-implied conditional log-characteristic function, which is functionally affine in the model's state vector. We formally derive an associated linear state space representation and establish the asymptotic properties of the corresponding measurement errors. The state space representation allows us to use a suitably modified Kalman filtering technique to learn about the latent state vector and a quasi-maximum likelihood estimator of the model parameters, which brings important computational advantages. We analyze the finite-sample behavior of our procedure in Monte Carlo simulations. The applicability of our procedure is illustrated in two case studies that analyze S&P 500 option prices and the impact of exogenous state variables capturing Covid-19 reproduction and economic policy uncertainty.
Download or read book The Effects of Certain Specification Errors on the Properties of Parameter Estimates in Small Samples of a Single Equation Model written by Kenneth Richard White and published by . This book was released on 1971 with total page 162 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Parameter Estimation and Behavior in the Black Scholes Model written by Deryl Winston Martin and published by . This book was released on 1984 with total page 322 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Efficient Quasi Bayesian Estimation of Affine Option Pricing Models Using Risk neutral Cumulants written by Riccardo Brignone and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: We propose a general, accurate and fast econometric approach for the estimation of affine option pricing models. The algorithm belongs to the class of Laplace-Type Estimation (LTE) techniques and exploits Sequential Monte Carlo (SMC) methods. We employ functions of the risk-neutral cumulants given in closed form to marginalize latent states, and we address parameter estimation by designing a density tempered SMC sampler. We test our algorithm on simulated data by tackling the challenging inference problem of estimating an option pricing model which displays two stochastic volatility factors, allows for co-jumps between price and volatility, and stochastic jump intensity. Furthermore, we consider real data and estimate the model on a large panel of option prices. Numerical studies confirm the accuracy of our estimates and the superiority of the proposed approach compared to its natural benchmark
Download or read book Reduced Form Estimation in Partially Specified Simultaneous Equations Models written by William Arthur Powell and published by . This book was released on 1993 with total page 204 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Option Pricing Using GARCH Models microform an Empirical Examination written by Sasseville, Caroline and published by Montréal : Service des archives, Université de Montréal, Section Microfilm. This book was released on 2002 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Using a Lattice Model to Estimate Reported Option Values written by Brian Bratten and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Statement of Financial Accounting Standards 123R suggests that lattice valuation models may improve the estimates of reported employee stock option values relative to the more commonly used Black-Scholes model. However, lattice model critics have expressed concerns that managers may use lattice models' flexibility to opportunistically understate option values. In this study, we investigate a sample of firms that recently adopted a lattice model to value employee stock options to provide evidence on this issue by identifying the determinants of lattice model adoption and examining the effect of lattice model use on reported option values. We report three main results. First, we find that firms are more likely to adopt a lattice model when it is more likely to produce lower values than the Black-Scholes model and when managers have incentives to lower stock option expense. Second, we find that firms adopting a lattice model increase understatement of reported option values more than firms that continue to use the Black-Scholes model and that the incremental understatement is due to use of the lattice model. Third, we conduct several tests to examine whether the valuation effect of lattice model use is consistent with efforts to correct for documented shortcomings in the Black-Scholes model and find no evidence that this is the case. Taken together, the evidence in this study suggests that firms adopt and implement lattice models primarily to lower reported option values.
Download or read book A Framework for Extracting the Probability of Default from Stock Option Prices written by Azusa Takeyama and published by . This book was released on 2012 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt:
