✦ LIBER ✦

S&P 500 index option tests of Jarrow and Rudd's approximate option valuation formula

✍ Scribed by Corrado, Charles J.; Su, Tie

Publisher: John Wiley and Sons
Year: 1996
Tongue: English
Weight: 935 KB
Volume: 16
Category: Article
ISSN: 0270-7314
DOI: 10.1002/(sici)1096-9934(199609)16:6<611::aid-fut1>3.0.co;2-i

No coin nor oath required. For personal study only.

✦ Synopsis

I9

12 5 . The horizontal axis measures option moneyness, defined as the percentage difference between a discounted strike price and a stock price, i.e.,

Ke-* -So

Ke-*

x 100 and the vertical axis measures values for -Q3 and Q4. The most telling observation from Figure is that negative skewness deviations from lognormality ( -Q3) cause the Black-Scholes formula to underprice in-themoney call options and overprice out-of-the-money call options.

📜 SIMILAR VOLUMES

Pricing and hedging S&P 500 index option

Pricing and hedging S&P 500 index options with Hermite polynomial approximation: empirical tests of Madan and Milne's model

✍ An�, Thierry 📂 Article 📅 1999 🏛 John Wiley and Sons 🌐 English ⚖ 225 KB 👁 2 views

The universal use of the Black and Scholes option pricing model to value a wide range of option contracts partly accounts for the almost systematic use of Gaussian distributions in finance. Empirical studies, however, suggest that there is an information content beyond the second moment of the distr

The information content of the S&P 500 i

The information content of the S&P 500 index and VIX options on the dynamics of the S&P 500 index

✍ San-Lin Chung; Wei-Che Tsai; Yaw-Huei Wang; Pei-Shih Weng 📂 Article 📅 2011 🏛 John Wiley and Sons 🌐 English ⚖ 259 KB 👁 2 views

Given that both S&P 500 index and VIX options essentially contain information about the future dynamics of the S&P 500 index, in this study, we set out to empirically investigate the informational roles played by these two option markets with regard to the prediction of returns, volatility, and dens