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Heston Nandi Option Pricing Model Applied to the CIVETS Indices

In: Advances in Cross-Section Data Methods in Applied Economic Research

Author

Listed:
  • Niel Oberholzer

    (University of Johannesburg)

  • Pierre J. Venter

    (University of Johannesburg)

Abstract

The purpose of thisOberholzer, Niel study is to make use of the Heston Nandi model to approximate option price surfaces for the CIVETS (Colombia, Indonesia, Vietnam, Egypt and South Africa) countries’ equity indices. Daily dataVenter, Pierre J. from 2010 to 2018 was used. The statistical properties of the return series show signs of leptokurtosis and volatility clustering, which is consistent with the stylised facts of financial returns. The approximated call option price surface is consistent with what is found in the market. The approximated option prices for Egypt and Turkey are slightly higher due to greater historical volatility, and a higher risk-free rate.

Suggested Citation

  • Niel Oberholzer & Pierre J. Venter, 2020. "Heston Nandi Option Pricing Model Applied to the CIVETS Indices," Springer Proceedings in Business and Economics, in: Nicholas Tsounis & Aspasia Vlachvei (ed.), Advances in Cross-Section Data Methods in Applied Economic Research, chapter 0, pages 593-603, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-38253-7_38
    DOI: 10.1007/978-3-030-38253-7_38
    as

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