A non-parametric option pricing model: Theory and empirical evidence

Ren Raw Chen; Oded Palmon

doi:10.1007/s11156-005-6333-2

A non-parametric option pricing model: Theory and empirical evidence

Ren Raw Chen^*, Oded Palmon

^*Corresponding author for this work

Rutgers - The State University of New Jersey, New Brunswick

Research output: Contribution to journal › Journal Article › peer-review

7 Scopus citations

Abstract

In this paper, we propose an empirically-based, non-parametric option pricing model to evaluate S&P 500 index options. Given the fact that the model is derived under the real measure, an equilibrium asset pricing model, instead of no-arbitrage, must be assumed. Using the histogram of past S&P 500 index returns, we find that most of the volatility smile documented in the literature disappears.

Original language	English
Pages (from-to)	115-134
Number of pages	20
Journal	Review of Quantitative Finance and Accounting
Volume	24
Issue number	2
DOIs	https://doi.org/10.1007/s11156-005-6333-2
State	Published - 03 2005
Externally published	Yes

Keywords

Implied volatility
Nonparametric model
Options
Volatility smile

Access to Document

10.1007/s11156-005-6333-2

Cite this

@article{42d9793577c54f57b1c4df34004d29bb,

title = "A non-parametric option pricing model: Theory and empirical evidence",

abstract = "In this paper, we propose an empirically-based, non-parametric option pricing model to evaluate S&P 500 index options. Given the fact that the model is derived under the real measure, an equilibrium asset pricing model, instead of no-arbitrage, must be assumed. Using the histogram of past S&P 500 index returns, we find that most of the volatility smile documented in the literature disappears.",

keywords = "Implied volatility, Nonparametric model, Options, Volatility smile",

author = "Chen, {Ren Raw} and Oded Palmon",

year = "2005",

month = mar,

doi = "10.1007/s11156-005-6333-2",

language = "英语",

volume = "24",

pages = "115--134",

journal = "Review of Quantitative Finance and Accounting",

issn = "0924-865X",

publisher = "Springer New York",

number = "2",

}

TY - JOUR

T1 - A non-parametric option pricing model

T2 - Theory and empirical evidence

AU - Chen, Ren Raw

AU - Palmon, Oded

PY - 2005/3

Y1 - 2005/3

N2 - In this paper, we propose an empirically-based, non-parametric option pricing model to evaluate S&P 500 index options. Given the fact that the model is derived under the real measure, an equilibrium asset pricing model, instead of no-arbitrage, must be assumed. Using the histogram of past S&P 500 index returns, we find that most of the volatility smile documented in the literature disappears.

AB - In this paper, we propose an empirically-based, non-parametric option pricing model to evaluate S&P 500 index options. Given the fact that the model is derived under the real measure, an equilibrium asset pricing model, instead of no-arbitrage, must be assumed. Using the histogram of past S&P 500 index returns, we find that most of the volatility smile documented in the literature disappears.

KW - Implied volatility

KW - Nonparametric model

KW - Options

KW - Volatility smile

UR - http://www.scopus.com/inward/record.url?scp=17744368931&partnerID=8YFLogxK

U2 - 10.1007/s11156-005-6333-2

DO - 10.1007/s11156-005-6333-2

M3 - 文章

AN - SCOPUS:17744368931

SN - 0924-865X

VL - 24

SP - 115

EP - 134

JO - Review of Quantitative Finance and Accounting

JF - Review of Quantitative Finance and Accounting

IS - 2

ER -

A non-parametric option pricing model: Theory and empirical evidence

Abstract

Keywords

Access to Document

Other files and links

Fingerprint

Cite this