An empirical test of the Hull-White option pricing model

Article Abstract:

The Hull and White stochastic volatility option pricing formula has a marked improvement over the constant volatility option pricing formula. This supports the fact that observed option prices on the S&P 500 index is equal to a mean-reverting stochastic volatility procedure, where return volatility is negatively related with changes in stock index levels. Also, the parameters of a stochastic volatility process can be determined from option prices to generate concrete forecasts of day-ahead relationships between option prices and index levels.

Stochastic processes, Stock index options

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S&P 500 Index option tests of Jarrow and Rudd's approximate option valuation formula

Article Abstract:

R. Jarrow and A. Rudd developed an expanded formula for accounting skewness and kurtosis deviations from lognormality in security price distributions based on the Black-Scholes option pricing model. The new formula was evaluated using data from the Standard and Poor's (S&P) 500 Index. The results showed that the distribution of S&P 500 index prices were marked by significant negative skewness and positive excess kurtosis.

Pricing

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The forecast quality of CBOE implied volatility indexes

Article Abstract:

A study of the forecast quality of Chicago Board Options Exchange implied volatility indexes is presented based on the Nasdaq 100 and Standard and Poor's 100 and 500 stock indexes.

Forecasts, trends, outlooks, Illinois, Economic aspects, Forecasts and trends, Market trend/market analysis, Chicago, Illinois, Standard and Poor's 100 Stock Price Index (Index), Nasdaq 100 Index (Index)

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