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Tekijä:Brandt, M.W.
Wu, T.
Otsikko:Cross-sectional tests of deterministic volatility functions
Lehti:Journal of Empirical Finance
2002 : DEC, VOL. 9:5, p. 525-550
Asiasana:Stock markets
Stock options
Pricing
Volatility
Models
Kieli:eng
Tiivistelmä:This paper studies the cross-sectional performance of option pricing models in which the volatility of the underlying stock is a deterministic function of the stock price and time. For each date in the paper's sample of FTSE 100 index option prices, fitted is an implied binomial tree to the panel of all European style options with different strike prices and maturities and then examined how well this model prices a corresponding panel of American style options. It is found that the implied binomial tree model performs no better than an ad-hoc procedure of smoothing BlackĀ–Scholes implied volatilities across strike prices and maturities. These cross-sectional results complement the time-series findings of Dumas et al. in J. Finance (1998): 53, 2059.
SCIMA tietueen numero: 239408
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