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Improved Maximum Likelihood Estimation of Heston Model and Pricing Efficiency Test: Hong Kong Hang Seng Index Option

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  • Huan Wang
  • Bin Song
  • Dongmei Guo

Abstract

This paper selects improved maximum likelihood method to conduct parameter estimation of Heston model, and results show that the share option pricing performance of Hang Seng Index is better and pricing error of at-the-money options is the smallest. By comparing parameter estimation of samples in different intervals, it has been found that parameter estimated results of two-year market data are obviously inferior to estimated effect of one-year data.

Suggested Citation

  • Huan Wang & Bin Song & Dongmei Guo, 2016. "Improved Maximum Likelihood Estimation of Heston Model and Pricing Efficiency Test: Hong Kong Hang Seng Index Option," Mathematical Problems in Engineering, Hindawi, vol. 2016, pages 1-9, August.
    • Handle: RePEc:hin:jnlmpe:7549537
    DOI: 10.1155/2016/7549537
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