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Specification Analysis of Option Pricing Models Based on Time- Changed Levy Processes

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Cited by:

  1. Audrino, Francesco & Fengler, Matthias R., 2015. "Are classical option pricing models consistent with observed option second-order moments? Evidence from high-frequency data," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 46-63.
  2. Xavier Calmet & Nathaniel Wiesendanger Shaw, 2020. "An analytical perturbative solution to the Merton–Garman model using symmetries," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(1), pages 3-22, January.
  3. Carr, Peter & Wu, Liuren, 2007. "Stochastic skew in currency options," Journal of Financial Economics, Elsevier, vol. 86(1), pages 213-247, October.
  4. Desogus, Marco & Conversano, Claudio & Pili, Ambrogio & Venturi, Beatrice, 2022. "Fractal analysis of Dow Jones Industrial Index returns," MPRA Paper 114923, University Library of Munich, Germany.
  5. repec:wyi:journl:002093 is not listed on IDEAS
  6. Christoffersen, Peter & Feunou, Bruno & Jeon, Yoontae, 2015. "Option valuation with observable volatility and jump dynamics," Journal of Banking & Finance, Elsevier, vol. 61(S2), pages 101-120.
  7. Christoffersen, Peter & Heston, Steven & Jacobs, Kris, 2010. "Option Anomalies and the Pricing Kernel," Working Papers 11-17, University of Pennsylvania, Wharton School, Weiss Center.
  8. Claudia Yeap & Simon S Kwok & S T Boris Choy, 2018. "A Flexible Generalized Hyperbolic Option Pricing Model and Its Special Cases," Journal of Financial Econometrics, Oxford University Press, vol. 16(3), pages 425-460.
  9. Gong, Xiaoli & Zhuang, Xintian, 2017. "American option valuation under time changed tempered stable Lévy processes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 466(C), pages 57-68.
  10. Erdemlioglu, Deniz & Laurent, Sébastien & Neely, Christopher J., 2015. "Which continuous-time model is most appropriate for exchange rates?," Journal of Banking & Finance, Elsevier, vol. 61(S2), pages 256-268.
  11. Shaliastovich, Ivan & Tauchen, George, 2011. "Pricing of the time-change risks," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 843-858, June.
  12. A. S. Hurn & K. A. Lindsay & A. J. McClelland, 2015. "Estimating the Parameters of Stochastic Volatility Models Using Option Price Data," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(4), pages 579-594, October.
  13. Todorov, Viktor & Tauchen, George, 2010. "Activity signature functions for high-frequency data analysis," Journal of Econometrics, Elsevier, vol. 154(2), pages 125-138, February.
  14. Christoffersen, Peter & Jacobs, Kris & Ornthanalai, Chayawat, 2012. "Dynamic jump intensities and risk premiums: Evidence from S&P500 returns and options," Journal of Financial Economics, Elsevier, vol. 106(3), pages 447-472.
  15. Wendong Zheng & Chi Hung Yuen & Yue Kuen Kwok, 2016. "Recursive Algorithms For Pricing Discrete Variance Options And Volatility Swaps Under Time-Changed Lévy Processes," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-29, March.
  16. Lars Stentoft, 2008. "American Option Pricing Using GARCH Models and the Normal Inverse Gaussian Distribution," Journal of Financial Econometrics, Oxford University Press, vol. 6(4), pages 540-582, Fall.
  17. Liuren Wu, 2006. "Dampened Power Law: Reconciling the Tail Behavior of Financial Security Returns," The Journal of Business, University of Chicago Press, vol. 79(3), pages 1445-1474, May.
  18. Fukuda, Kosei, 2009. "Distribution switching in financial time series," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(5), pages 1711-1720.
  19. Peter Christoffersen & Redouane Elkamhi & Bruno Feunou & Kris Jacobs, 2010. "Option Valuation with Conditional Heteroskedasticity and Nonnormality," The Review of Financial Studies, Society for Financial Studies, vol. 23(5), pages 2139-2183.
  20. Bakshi, Gurdip & Panayotov, George, 2010. "First-passage probability, jump models, and intra-horizon risk," Journal of Financial Economics, Elsevier, vol. 95(1), pages 20-40, January.
  21. Dario Alitab & Giacomo Bormetti & Fulvio Corsi & Adam A. Majewski, 2019. "A realized volatility approach to option pricing with continuous and jump variance components," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 42(2), pages 639-664, December.
  22. Cummins, Mark & Kiely, Greg & Murphy, Bernard, 2018. "Gas storage valuation under multifactor Lévy processes," Journal of Banking & Finance, Elsevier, vol. 95(C), pages 167-184.
  23. Ballotta, Laura & Rayée, Grégory, 2022. "Smiles & smirks: Volatility and leverage by jumps," European Journal of Operational Research, Elsevier, vol. 298(3), pages 1145-1161.
  24. Christoffersen, Peter & Jacobs, Kris & Chang, Bo Young, 2013. "Forecasting with Option-Implied Information," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 581-656, Elsevier.
  25. Feunou, Bruno & Okou, Cédric, 2019. "Good Volatility, Bad Volatility, and Option Pricing," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 54(2), pages 695-727, April.
  26. Eva Ferreira & Mónica Gago & Angel León & Gonzalo Rubio, 2005. "An empirical comparison of the performance of alternative option pricing models," Investigaciones Economicas, Fundación SEPI, vol. 29(3), pages 483-523, September.
  27. Peilun He & Nino Kordzakhia & Gareth W. Peters & Pavel V. Shevchenko, 2024. "Multi-Factor Polynomial Diffusion Models and Inter-Temporal Futures Dynamics," Papers 2409.19386, arXiv.org.
  28. Ornthanalai, Chayawat, 2014. "Lévy jump risk: Evidence from options and returns," Journal of Financial Economics, Elsevier, vol. 112(1), pages 69-90.
  29. Yacine Aït-Sahalia & Jean Jacod, 2012. "Analyzing the Spectrum of Asset Returns: Jump and Volatility Components in High Frequency Data," Journal of Economic Literature, American Economic Association, vol. 50(4), pages 1007-1050, December.
  30. Shackleton, Mark B. & Taylor, Stephen J. & Yu, Peng, 2010. "A multi-horizon comparison of density forecasts for the S&P 500 using index returns and option prices," Journal of Banking & Finance, Elsevier, vol. 34(11), pages 2678-2693, November.
  31. Henri Bertholon & Alain Monfort & Fulvio Pegoraro, 2006. "Pricing and Inference with Mixtures of Conditionally Normal Processes," Working Papers 2006-28, Center for Research in Economics and Statistics.
  32. Lee, Suzanne S. & Hannig, Jan, 2010. "Detecting jumps from Lévy jump diffusion processes," Journal of Financial Economics, Elsevier, vol. 96(2), pages 271-290, May.
  33. Bertrand, Philippe & Prigent, Jean-luc, 2011. "Omega performance measure and portfolio insurance," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1811-1823, July.
  34. Christoffersen, Peter & Dorion, Christian & Jacobs, Kris & Wang, Yintian, 2010. "Volatility Components, Affine Restrictions, and Nonnormal Innovations," Journal of Business & Economic Statistics, American Statistical Association, vol. 28(4), pages 483-502.
  35. Lancelot F. James, 2005. "A note on exact likelihoods of the Carr-Wu models for leverage effects and volatility in financial economics," Papers math/0503314, arXiv.org, revised Mar 2005.
  36. Peter Christoffersen & Steven Heston & Kris Jacobs, 2009. "The Shape and Term Structure of the Index Option Smirk: Why Multifactor Stochastic Volatility Models Work So Well," Management Science, INFORMS, vol. 55(12), pages 1914-1932, December.
  37. José Fajardo & Ernesto Mordecki, 2005. "Duality and Derivative Pricing with Time-Changed Lévy Processes," IBMEC RJ Economics Discussion Papers 2005-12, Economics Research Group, IBMEC Business School - Rio de Janeiro.
  38. Ruan, Xinfeng & Zhu, Wenli & Huang, Jiexiang & Zhang, Jin E., 2016. "Equilibrium asset pricing under the Lévy process with stochastic volatility and moment risk premiums," Economic Modelling, Elsevier, vol. 54(C), pages 326-338.
  39. Gurdip Bakshi & Liuren Wu, 2010. "The Behavior of Risk and Market Prices of Risk Over the Nasdaq Bubble Period," Management Science, INFORMS, vol. 56(12), pages 2251-2264, December.
  40. Benzoni, Luca & Collin-Dufresne, Pierre & Goldstein, Robert S., 2011. "Explaining asset pricing puzzles associated with the 1987 market crash," Journal of Financial Economics, Elsevier, vol. 101(3), pages 552-573, September.
  41. Fabozzi, Frank J. & Leccadito, Arturo & Tunaru, Radu S., 2014. "Extracting market information from equity options with exponential Lévy processes," Journal of Economic Dynamics and Control, Elsevier, vol. 38(C), pages 125-141.
  42. Christoffersen, Peter & Jacobs, Kris & Ornthanalai, Chayawat & Wang, Yintian, 2008. "Option valuation with long-run and short-run volatility components," Journal of Financial Economics, Elsevier, vol. 90(3), pages 272-297, December.
  43. Richard Holowczak & Yusif Simaan & Liuren Wu, 2006. "Price discovery in the U.S. stock and stock options markets: A portfolio approach," Review of Derivatives Research, Springer, vol. 9(1), pages 37-65, January.
  44. Cui, Zhenyu & Lars Kirkby, J. & Nguyen, Duy, 2019. "A general framework for time-changed Markov processes and applications," European Journal of Operational Research, Elsevier, vol. 273(2), pages 785-800.
  45. Gong, Xiaoli & Zhuang, Xintian, 2017. "Measuring financial risk and portfolio reversion with time changed tempered stable Lévy processes," The North American Journal of Economics and Finance, Elsevier, vol. 40(C), pages 148-159.
  46. Carverhill, Andrew & Luo, Dan, 2023. "A Bayesian analysis of time-varying jump risk in S&P 500 returns and options," Journal of Financial Markets, Elsevier, vol. 64(C).
  47. Ben-zhang Yang & Jia Yue & Nan-jing Huang, 2017. "Variance swaps under L\'{e}vy process with stochastic volatility and stochastic interest rate in incomplete markets," Papers 1712.10105, arXiv.org, revised Mar 2018.
  48. Majewski, Adam A. & Bormetti, Giacomo & Corsi, Fulvio, 2015. "Smile from the past: A general option pricing framework with multiple volatility and leverage components," Journal of Econometrics, Elsevier, vol. 187(2), pages 521-531.
  49. Hsuan-Chu Lin & Ren-Raw Chen & Oded Palmon, 2016. "Explaining the volatility smile: non-parametric versus parametric option models," Review of Quantitative Finance and Accounting, Springer, vol. 46(4), pages 907-935, May.
  50. Juho Kanniainen & Robert Pich'e, 2012. "Stock Price Dynamics and Option Valuations under Volatility Feedback Effect," Papers 1209.4718, arXiv.org.
  51. Pawel J. Szerszen, 2009. "Bayesian analysis of stochastic volatility models with Lévy jumps: application to risk analysis," Finance and Economics Discussion Series 2009-40, Board of Governors of the Federal Reserve System (U.S.).
  52. Alonso, Francisco & Blanco, Roberto & Rubio Irigoyen, Gonzalo, 2005. "Testing the Forecasting Performance of Ibex 35 Option-implied Risk-neutral Densities," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
  53. van Bilsen, Servaas & Linders, Daniël, 2019. "Affordable and adequate annuities with stable payouts: Fantasy or reality?," Insurance: Mathematics and Economics, Elsevier, vol. 86(C), pages 19-42.
  54. Grishchenko, Olesya V. & Vanden, Joel M. & Zhang, Jianing, 2016. "The informational content of the embedded deflation option in TIPS," Journal of Banking & Finance, Elsevier, vol. 65(C), pages 1-26.
  55. Lorenzo Torricelli, 2016. "Valuation of asset and volatility derivatives using decoupled time-changed Lévy processes," Review of Derivatives Research, Springer, vol. 19(1), pages 1-39, April.
  56. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
  57. Fajardo, José & Mordecki, Ernesto, 2008. "Duality and Symmetry with Time-Changed Lévy Processes," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 28(1), May.
  58. Kanniainen, Juho & Piché, Robert, 2013. "Stock price dynamics and option valuations under volatility feedback effect," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(4), pages 722-740.
  59. repec:qut:auncer:2012_11 is not listed on IDEAS
  60. Peter Carr & Liuren Wu, 2004. "Variance Risk Premia," Finance 0409015, University Library of Munich, Germany.
  61. Li, Junye, 2011. "Volatility components, leverage effects, and the return-volatility relations," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1530-1540, June.
  62. Claudia Ribeiro & Nick Webber, 2006. "Correcting for Simulation Bias in Monte Carlo Methods to Value Exotic Options in Models Driven by Levy Processes," Applied Mathematical Finance, Taylor & Francis Journals, vol. 13(4), pages 333-352.
  63. Wang, Guanying & Wang, Xingchun & Zhou, Ke, 2017. "Pricing vulnerable options with stochastic volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 485(C), pages 91-103.
  64. Alok Dixit & Shivam Singh, 2018. "Ad-Hoc Black–Scholes vis-à-vis TSRV-based Black–Scholes: Evidence from Indian Options Market," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(1), pages 57-88, March.
  65. Byun, Suk Joon & Jeon, Byoung Hyun & Min, Byungsun & Yoon, Sun-Joong, 2015. "The role of the variance premium in Jump-GARCH option pricing models," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 38-56.
  66. Sharif Mozumder & Bakhtear Talukdar & M. Humayun Kabir & Bingxin Li, 2024. "Non-linear volatility with normal inverse Gaussian innovations: ad-hoc analytic option pricing," Review of Quantitative Finance and Accounting, Springer, vol. 62(1), pages 97-133, January.
  67. Kaeck, Andreas, 2013. "Asymmetry in the jump-size distribution of the S&P 500: Evidence from equity and option markets," Journal of Economic Dynamics and Control, Elsevier, vol. 37(9), pages 1872-1888.
  68. Liu, Xiaoquan & Cao, Yi & Ma, Chenghu & Shen, Liya, 2019. "Wavelet-based option pricing: An empirical study," European Journal of Operational Research, Elsevier, vol. 272(3), pages 1132-1142.
  69. Akira Yamazaki, 2014. "Pricing average options under time-changed Lévy processes," Review of Derivatives Research, Springer, vol. 17(1), pages 79-111, April.
  70. Kai‐Jiun Chang & Mao‐Wei Hung & Yaw‐Huei Wang & Kuang‐Chieh Yen, 2019. "Volatility information implied in the term structure of VIX," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(1), pages 56-71, January.
  71. Ren, Yu & Shimotsu, Katsumi, 2009. "Improvement in finite sample properties of the Hansen-Jagannathan distance test," Journal of Empirical Finance, Elsevier, vol. 16(3), pages 483-506, June.
  72. Adam Aleksander Majewski & Giacomo Bormetti & Fulvio Corsi, 2014. "Smile from the Past: A general option pricing framework with multiple volatility and leverage components," Papers 1404.3555, arXiv.org.
  73. Rui Fan & Stephen J. Taylor & Matteo Sandri, 2018. "Density forecast comparisons for stock prices, obtained from high‐frequency returns and daily option prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(1), pages 83-103, January.
  74. Rubio Irigoyen, Gonzalo & Ferreira García, María Eva & Gago, Mónica & León, Angel, 2002. "An empirical comparison of the performance of alternative option pricing models," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
  75. Zhiyuan Pan & Yudong Wang & Li Liu, 2021. "Realized bipower variation, jump components, and option valuation," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(12), pages 1933-1958, December.
  76. Bakshi, Gurdip & Madan, Dilip & Panayotov, George, 2010. "Returns of claims on the upside and the viability of U-shaped pricing kernels," Journal of Financial Economics, Elsevier, vol. 97(1), pages 130-154, July.
  77. Chou-Wen Wang & Ting-Yi Wu, 2010. "Futures and futures options with basis risk: theoretical and empirical perspectives," Quantitative Finance, Taylor & Francis Journals, vol. 11(3), pages 477-485.
  78. Kanniainen, Juho & Lin, Binghuan & Yang, Hanxue, 2014. "Estimating and using GARCH models with VIX data for option valuation," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 200-211.
  79. Jin Zhang & Yi Xiang, 2008. "The implied volatility smirk," Quantitative Finance, Taylor & Francis Journals, vol. 8(3), pages 263-284.
  80. Cyrus Ramezani & Yong Zeng, 2007. "Maximum likelihood estimation of the double exponential jump-diffusion process," Annals of Finance, Springer, vol. 3(4), pages 487-507, October.
  81. Fajardo, Jose Santiago, 2006. "Equivalent Martingale Measures and Lévy Processes," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 60(4), February.
  82. Jin E. Zhang & Eric C. Chang & Huimin Zhao, 2020. "Market Excess Returns, Variance and the Third Cumulant," International Review of Finance, International Review of Finance Ltd., vol. 20(3), pages 605-637, September.
  83. Huang, Jing-Zhi & Ni, Jun & Xu, Li, 2022. "Leverage effect in cryptocurrency markets," Pacific-Basin Finance Journal, Elsevier, vol. 73(C).
  84. Pakorn Aschakulporn & Jin E. Zhang, 2022. "Bakshi, Kapadia, and Madan (2003) risk‐neutral moment estimators: An affine jump‐diffusion approach," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(3), pages 365-388, March.
  85. Xavier Calmet & Nathaniel Wiesendanger Shaw, 2019. "An analytical perturbative solution to the Merton Garman model using symmetries," Papers 1909.01413, arXiv.org, revised Jan 2021.
  86. Fontana, Claudio & Gnoatto, Alessandro & Szulda, Guillaume, 2023. "CBI-time-changed Lévy processes," Stochastic Processes and their Applications, Elsevier, vol. 163(C), pages 323-349.
  87. Peter Christoffersen & Kris Jacobs & Chayawat Ornthanalai, 2009. "Exploring Time-Varying Jump Intensities: Evidence from S&P500 Returns and Options," CIRANO Working Papers 2009s-34, CIRANO.
  88. Peter Christoffersen & Kris Jacobs & Karim Mimouni, 2007. "Models for S&P500 Dynamics: Evidence from Realized Volatility, Daily Returns, and Option Prices," CREATES Research Papers 2007-37, Department of Economics and Business Economics, Aarhus University.
  89. Bruno Feunou & Cédric Okou, 2018. "Risk‐neutral moment‐based estimation of affine option pricing models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 33(7), pages 1007-1025, November.
  90. Saranya Kshatriya & Krishna Prasanna, 2020. "Unveiling Contemporaneous Relations Between Jump Risk and Cross Section of Stock Returns," International Review of Finance, International Review of Finance Ltd., vol. 20(3), pages 581-604, September.
  91. Jiling Cao & Xinfeng Ruan & Shu Su & Wenjun Zhang, 2021. "Specification analysis of VXX option pricing models under Lévy processes," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(9), pages 1456-1477, September.
  92. Bates, David S., 2012. "U.S. stock market crash risk, 1926–2010," Journal of Financial Economics, Elsevier, vol. 105(2), pages 229-259.
  93. Jian Chen & Xiaoquan Liu & Chenghu Ma, 2013. "Risk-neutral and Physical Jumps in Option Pricing," WISE Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
  94. Li, Minqiang, 2008. "Price Deviations of S&P 500 Index Options from the Black-Scholes Formula Follow a Simple Pattern," MPRA Paper 11530, University Library of Munich, Germany.
  95. Ben-Zhang Yang & Jia Yue & Nan-Jing Huang, 2019. "Equilibrium Price Of Variance Swaps Under Stochastic Volatility With Lévy Jumps And Stochastic Interest Rate," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 22(04), pages 1-33, June.
  96. Claudio Fontana & Alessandro Gnoatto & Guillaume Szulda, 2022. "CBI-time-changed Lévy processes," Working Papers 05/2022, University of Verona, Department of Economics.
  97. Li, Junye, 2012. "Option-implied volatility factors and the cross-section of market risk premia," Journal of Banking & Finance, Elsevier, vol. 36(1), pages 249-260.
  98. Gurdip Bakshi & Charles Cao & Zhaodong (Ken) Zhong, 2021. "Assessing models of individual equity option prices," Review of Quantitative Finance and Accounting, Springer, vol. 57(1), pages 1-28, July.
  99. Slim, Skander, 2016. "On the source of stochastic volatility: Evidence from CAC40 index options during the subprime crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 463(C), pages 63-76.
  100. Lindström, Erik & Ströjby, Jonas & Brodén, Mats & Wiktorsson, Magnus & Holst, Jan, 2008. "Sequential calibration of options," Computational Statistics & Data Analysis, Elsevier, vol. 52(6), pages 2877-2891, February.
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