Option pricing with dynamic conditional skewness

IF 1.8 4区 经济学 Q2 BUSINESS, FINANCE
Fang Liang, Lingshan Du
{"title":"Option pricing with dynamic conditional skewness","authors":"Fang Liang,&nbsp;Lingshan Du","doi":"10.1002/fut.22501","DOIUrl":null,"url":null,"abstract":"<p>In this paper, we develop a discrete-time affine option-pricing model that explicitly incorporates the dynamics of conditional skewness. The new proposed model features different dynamics for conditional skewness and variance. To stress the difference in information, we use alternative realized measures constructed from high-frequency historical returns to update skewness and variance dynamics. By Fourier inversion, we derive closed-form option valuation formulas. Empirically, the flexibility that the model offers for conditional skewness as well as high-frequency information from the underlying asset contribute to superior performance upon benchmark models using S&amp;P 500 index options. Overall, the joint modeling of dynamic conditional skewness and realized measures leads to an out-of-sample gain of 12.25% in pricing accuracy. The improvements are more pronounced for deep in-the-money calls, options with shorter maturities, and during highly volatile periods.</p>","PeriodicalId":15863,"journal":{"name":"Journal of Futures Markets","volume":"44 7","pages":"1154-1188"},"PeriodicalIF":1.8000,"publicationDate":"2024-04-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Futures Markets","FirstCategoryId":"96","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1002/fut.22501","RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0

Abstract

In this paper, we develop a discrete-time affine option-pricing model that explicitly incorporates the dynamics of conditional skewness. The new proposed model features different dynamics for conditional skewness and variance. To stress the difference in information, we use alternative realized measures constructed from high-frequency historical returns to update skewness and variance dynamics. By Fourier inversion, we derive closed-form option valuation formulas. Empirically, the flexibility that the model offers for conditional skewness as well as high-frequency information from the underlying asset contribute to superior performance upon benchmark models using S&P 500 index options. Overall, the joint modeling of dynamic conditional skewness and realized measures leads to an out-of-sample gain of 12.25% in pricing accuracy. The improvements are more pronounced for deep in-the-money calls, options with shorter maturities, and during highly volatile periods.

具有动态条件偏度的期权定价
在本文中,我们建立了一个离散时间仿射期权定价模型,该模型明确包含了条件偏度的动态变化。新提出的模型具有不同的条件偏度和方差动态。为了强调信息的差异,我们使用从高频历史回报中构建的替代实现度量来更新偏度和方差动态。通过傅立叶反演,我们得出了闭式期权估值公式。从经验来看,该模型在条件偏度方面的灵活性以及来自标的资产的高频信息,使其在使用 S&P 500 指数期权的基准模型中表现更优。总体而言,动态条件偏度和已实现度量的联合建模使定价准确性在样本外提高了 12.25%。对于深度价内看涨期权、期限较短的期权以及高波动期权,这种改进更为明显。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
求助全文
约1分钟内获得全文 求助全文
来源期刊
Journal of Futures Markets
Journal of Futures Markets BUSINESS, FINANCE-
CiteScore
3.70
自引率
15.80%
发文量
91
期刊介绍: The Journal of Futures Markets chronicles the latest developments in financial futures and derivatives. It publishes timely, innovative articles written by leading finance academics and professionals. Coverage ranges from the highly practical to theoretical topics that include futures, derivatives, risk management and control, financial engineering, new financial instruments, hedging strategies, analysis of trading systems, legal, accounting, and regulatory issues, and portfolio optimization. This publication contains the very latest research from the top experts.
×
引用
GB/T 7714-2015
复制
MLA
复制
APA
复制
导出至
BibTeX EndNote RefMan NoteFirst NoteExpress
×
提示
您的信息不完整,为了账户安全,请先补充。
现在去补充
×
提示
您因"违规操作"
具体请查看互助需知
我知道了
×
提示
确定
请完成安全验证×
copy
已复制链接
快去分享给好友吧!
我知道了
右上角分享
点击右上角分享
0
联系我们:info@booksci.cn Book学术提供免费学术资源搜索服务,方便国内外学者检索中英文文献。致力于提供最便捷和优质的服务体验。 Copyright © 2023 布克学术 All rights reserved.
京ICP备2023020795号-1
ghs 京公网安备 11010802042870号
Book学术文献互助
Book学术文献互助群
群 号:481959085
Book学术官方微信