Analyzing Taiwan Stock Index Option by Edgeworth Expansion Method

• Main Authors: Chun-Nan Li, 李俊男
• Other Authors: Pai-Ta. Shih
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/a59kk7

碩士 === 國立東華大學 === 國際經濟研究所 === 95 === This paper uses the Jarrow and Rudd option pricing model on Taiwan Stock Index Option (TXO) empirical data to obtain the Taiwan Stock Index Option theoretical price and then discuss the option pricing error with Taiwan Stock Index Option theoretical price compared with real market price. The method uses Lognormal distribution to approximate real underlying asset distribution by way of Edgeworth Expansion Series. Then, according to the Simultaneous Equations Procedure ,addressed by Whaley, estimate the optimal Implied Standard Deviation (ISD)、 Coefficients of Implied Skewness (ISK)、Coefficients of Implied Kurtosis (IKT) and other estimation values…etc.; by this procedure, we can then obtain the Jarrow-Rudd option pricing model theoretical price (JRP).Also, we use JRP to compare with Black-Schloes option pricing model theoretical price (BSP) on the basis of the real world market option price and find the best pricing effects. According to the empirical result of this paper, we can show that: pricing by Jarrow-Rudd model on Taiwan Stock Index Option (TXO) data does not show better effects than pricing by Black-Schloes model even bad. However, this paper use error ratio method to correct Whaley`s Simultaneous Equations Procedure, then obtain the adjusted estimate values pricing the Jarrow-Rudd option pricing model theoretical price. Then, we can find that pricing effect with error ratio method are all superior to general estimate rule (error value method) pricing the Jarrow-Rudd option pricing model theoretical price. Furthermore, this papar use the adjusted Jarrow-Rudd option pricing model theoretical price put in dummy variables show better effects than BSP and JRP. Even though, in option contract with long term Time-to-Maturity (TTM) the pricing errors are zero.