Option Pricing with a Dynamic Fat-Tailed Model
Aboura, Sofiane; Valeyre, Sébastien; Wagner, Niklas (2013-03), Option Pricing with a Dynamic Fat-Tailed Model, 62nd Annual Meeting of the Midwest Finance Association - MFA 2013 Annual Meeting, 2013-03, Chicago, United States
Type
Communication / ConférenceExternal document link
http://dx.doi.org/10.2139/ssrn.2031400Date
2013-03Conference title
62nd Annual Meeting of the Midwest Finance Association - MFA 2013 Annual MeetingConference date
2013-03Conference city
ChicagoConference country
United StatesPages
38 p.
Metadata
Show full item recordAuthor(s)
Aboura, SofianeDauphine Recherches en Management [DRM]
Valeyre, Sébastien
Wagner, Niklas
Passau University
Abstract (FR)
In the aftermath of the 2008 financial crisis, the need to consider more realistic risk models for derivative products has received renewed attention. We introduce a dynamic model for the pricing of European-style options with various attractive features such as a mixture of heavy-tails and Gaussian distribution along with a leverage effect property. We test the model on FTSE 100 stock index options during the period of January 2008 to June 2009. Our empirical results show that the model adequately fits the volatility smile dynamics particularly during stress periods. Furthermore, we find that the leverage effect form is driven by the sticky-strike rule.Subjects / Keywords
European-style option pricing; volatility smile; risk modelRelated items
Showing items related by title and author.
-
Aboura, Sofiane; Valeyre, Sébastien; Wagner, Niklas (2014-08) Article accepté pour publication ou publié
-
Valeyre, Sébastien; Grebenkov, Denis; Aboura, Sofiane; Liu, Qian (2013-11) Article accepté pour publication ou publié
-
Bouin, Emeric; Garnier, Jimmy; Henderson, Christopher; Patout, Florian (2018) Article accepté pour publication ou publié
-
Aboura, Sofiane (2013-07) Article accepté pour publication ou publié
-
Aboura, Sofiane; Wagner, Niklas (2014-06) Document de travail / Working paper