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| Author: | Solibakke, P. B. |
| Title: | Validity of discrete-time stochastic volatility models in non-synchronous equity markets |
| Journal: | European Journal of Finance
2003 : OCT, VOL. 9:5, p. 420-448 |
| Index terms: | Volatility STock markets |
| Freeterms: | Non-synchronous trading Discrete-time stochastic volatility |
| Language: | eng |
| Abstract: | The efficient method of moments (EMM) is used to fit versions of the discrete-time stochastic volatility (SV) model. The EMM methodology confronts moment conditions generated by a score generator (SNP) that are valid by construction. The moment generator suggests non-linearity in the index series. The EMM construction shows that a clasical discrete time stochastic volatility model is rejected. The results suggest that BS does not price asymmetry adequately. Asymmetry suggests increased market risk inducing higher BS call prices and lower BS put pricing for ATM and OTM options relative to MC. |
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