A Non-Parametric Option Pricing Model: Theory and Empirical Evidence

In this paper, we propose an empirically-based, non-parametric option pricing model to evaluate S&P 500 index options. Given the fact that the model is derived under the real measure, an equilibrium asset pricing model, instead of no-arbitrage, must be assumed. Using the histogram of past S&P 500 index returns, we find that most of the volatility smile documented in the literature disappears. Copyright Springer Science + Business Media, Inc. 2005

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Year of publication:	2005
Authors:	Chen, Ren-Raw ; Palmon, Oded
Published in:	Review of Quantitative Finance and Accounting. - Springer. - Vol. 24.2005, 2, p. 115-134
Publisher:	Springer
Subject:	options \| implied volatility \| volatility smile \| nonparametric model

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005701215