Explaining the volatility smile: Non-parametric versus parametric option models

Hsuan Chu Lin, Ren Raw Chen, Oded Palmon

研究成果: Article同行評審

2 引文 斯高帕斯(Scopus)

摘要

We employ a “non-parametric” pricing approach of European options to explain the volatility smile. In contrast to “parametric” models that assume that the underlying state variable(s) follows a stochastic process that adheres to a strict functional form, “non-parametric” models directly fit the end distribution of the underlying state variable(s) with statistical distributions that are not represented by parametric functions. We derive an approximation formula which prices SandP 500 index options in closed form which corresponds to the lower bound recently proposed by Lin et al. (Rev Quant Financ Account 38(1):109–129, 2012). Our model yields option prices that are more consistent with the data than the option prices that are generated by several widely used models. Although a quantitative comparison with other non-parametric models is more difficult, there are indications that our model is also more consistent with the data than these models.

原文English
頁(從 - 到)907-935
頁數29
期刊Review of Quantitative Finance and Accounting
46
發行號4
DOIs
出版狀態Published - 2016 5月 1

All Science Journal Classification (ASJC) codes

  • 會計
  • 一般商業,管理和會計
  • 金融

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