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The Performance of Skewness and Kurtosis Adjusted Option Pricing Model in Emerging Markets: A case of Turkish Derivatives Market

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  • Ozge Sezgin Alp

    (Baskent University, Department of Accounting and Finance)

Abstract

In this study, the option pricing performance of the adjusted Black-Scholes model proposed by Corrado and Su (1996) and corrected by Brown and Robinson (2002), is investigated and compared with original Black Scholes pricing model for the Turkish derivatives market. The data consist of the European options written on BIST 30 index extends from January 02, 2015 to April 24, 2015 for given exercise prices with maturity April 30, 2015. In this period, the strike prices are ranging from 86 to 124. To compare the models, the implied parameters are derived by minimizing the sum of squared deviations between the observed and theoretical option prices. The implied distribution of BIST 30 index does not significantly deviate from normal distribution. In addition, pricing performance of Black Scholes model performs better in most of the time.

Suggested Citation

  • Ozge Sezgin Alp, 2016. "The Performance of Skewness and Kurtosis Adjusted Option Pricing Model in Emerging Markets: A case of Turkish Derivatives Market," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 5(3), pages 70-84, April.
    • Handle: RePEc:rbs:ijfbss:v:5:y:2016:i:3:p:70-84
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