Empirical performance of affine option pricing models: evidence from the Australian index options market

• Autores: Timothy Sharp, Steven Li, David Allen
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 20, Nº. 4-6, 2010, págs. 501-514
• Idioma: inglés
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• Resumen

  • This article investigates the performance of affine option pricing models in the context of the Australian Standard & Poor's (S&P)/Australian Stock Exchange (ASX) 200 index option market. This investigation is done through the implicit estimation of the risk neutral parameters of affine option pricing models using S&P/ASX 200 index options data between January 2001 and December 2006. In particular, Stochastic Volatility (SV) and jumps in both price and volatility are considered. Our research indicates that call options are best modelled with a process that includes SV and jumps in price and volatility, while put options are best modelled with a process that allows SV and jumps in price (but not in volatility). Under the assumption of near constant parameters through time a more parsimonious model is the best choice, with a plain SV model performing best for call options and a jump-diffusion or a SV model performing equally well for put options.