Skewness- and Kurtosis-adjusted American Option Pricing Model
碩士 === 國立中正大學 === 財務金融學系 === 86 === The traditional American pricing model frequently misprices deep-in-the-money and deep-out-of-the-money options. Practitioners popularly refer to these strike price biase as volatility smiles. In this pa...
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| Format: | Others |
| Language: | zh-TW |
| Published: |
1998
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| Online Access: | http://ndltd.ncl.edu.tw/handle/72832617355691413308 |
| Summary: | 碩士 === 國立中正大學 === 財務金融學系 === 86 === The traditional American pricing model frequently misprices
deep-in-the-money and deep-out-of-the-money options.
Practitioners popularly refer to these strike price biase as
volatility smiles. In this paper we exam in a methodto extend
the Barone-Adesi and Whaley (1987) American option pricing
modelto account for biases induced by nonnormal skewness and
kurtosis in stockreturn distributions. The method adapts a Gram-
Charlier series expansion ofthe normal density function to
provide skewness and kurtosis adjustment termsfor the Barone-
Adesi and Whaley's(1987) formula. Using this method, we
estimateoption implied coefficients of skewness and kurtosis in
S&P 500 index futuresreturns. We find significant nonnormal
skewness and kurtosis implied by option price.
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