A Comparison of Empirical Performance : Pricing models vs pricing Kernels

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This study examines the empirical performance of the option pricing models and the pricing kernel-based models in the KOSPI 200 options market. We evaluate the pricing model, the pricing kernel-based GARCH option modle, Black-Scholes option pricing model, and the parametric pricing kernel models proposed by Rosenberg and Engle (2002) under the unified framework in which the underlying process follows the extended Duan (1995)-GARCH process. We find that empirical performance of the models is fairly improved when we estimate the parameters of models using the option data compared to the results when we only use the underlying data. The parametric pricing kernel of which functional form is a chebyshevpolynomial function shows the best pricing (forecasting) performance for all options among models we investigate. Unlike the pricing (forecasting) results, the difference of hedging performance between the models is relatively small.
Publisher
한국파생상품학회
Issue Date
2008-11-28
Language
ENG
Citation

2008년 한국 파생상품학회 추계 학술연구 발표회

URI
http://hdl.handle.net/10203/10373
Appears in Collection
MT-Conference Papers(학술회의논문)

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