Artikel
Mandelbrot and the Smile
Mandelbrot and the Smile It is a well-documented empirical fact that index option prices systematically differ from Black-Scholes prices. However, previous research provides inconclusive results whether the observed volatility smile could be explained by a discretetime dynamic model of stock returns with skewed, leptokurtic innovations. The improvements in pricing errors are particularly pronounced for out-of-the money put options, while the models partly underperform a Gaussian alternative for near-the-money options. Motivated by theses empirical evidence, I develop a new GARCH option-pricing model with a more flexible innovation structure. In an application of the model to DAX index options, I test the relative performance of the approach against a standard nested GARCH specification and the well-known practitioners Black-Scholes model. I show that the performance of the truncated Lévy GARCH option pricing model is superior to existing approaches. (JEL G12)
- Sprache
-
Englisch
- Erschienen in
-
Journal: Kredit und Kapital ; ISSN: 1865-5734 ; Volume: 42 ; Year: 2009 ; Issue: 1 ; Pages: 125-144
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Lehnert, Thorsten
- Ereignis
-
Veröffentlichung
- (wer)
-
Duncker & Humblot
- (wo)
-
Berlin
- (wann)
-
2009
- DOI
-
doi:10.3790/kuk.42.1.125
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
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Objekttyp
- Artikel
Beteiligte
- Lehnert, Thorsten
- Duncker & Humblot
Entstanden
- 2009
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