IDEAS home Printed from https://ideas.repec.org/a/taf/apmtfi/v31y2024i1p37-56.html
   My bibliography  Save this article

Short Option Maturity Term Structures of Skewness and Excess Kurtosis

Author

Listed:
  • Dilip B. Madan
  • King Wang

Abstract

Absolute skewness and excess kurtosis are observed to increase with maturity for short maturity options in contrast to the result for the longer maturities. Lévy and Sato processes are not consistent with this behaviour. Neither are additive processes obtained by arbitrary time changes and space scalings applied to an underlying Lévy process. Additive processes with bilateral gamma marginals along with separate space scalings and time changes applied to the up and down moves are observed to deliver such term structures. The two sided CGMY model with infinite variation on the up side and finite variation down deliver term structure results qualitatively similar to that of the raw data on skewness and excess kurtosis. However, this model falls short in the quantitative magnitudes for maturity elasticities of absolute skewness and excess kurtosis.

Suggested Citation

  • Dilip B. Madan & King Wang, 2024. "Short Option Maturity Term Structures of Skewness and Excess Kurtosis," Applied Mathematical Finance, Taylor & Francis Journals, vol. 31(1), pages 37-56, January.
    • Handle: RePEc:taf:apmtfi:v:31:y:2024:i:1:p:37-56
    DOI: 10.1080/1350486X.2024.2377957
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1350486X.2024.2377957
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1350486X.2024.2377957?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apmtfi:v:31:y:2024:i:1:p:37-56. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAMF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.