Option calibration of exponential Lévy models: Implementation and empirical results

Observing prices of European put and call options, we calibrate exponential Lévy models nonparametrically. We discuss the implementation of the spectral estimation procedures for Lévy models of finite jump activity as well as for self-decomposable Lévy models and improve these methods. Confidence intervals are constructed for the estimators in the nite activity case. They allow inference on the behavior of the parameters when the option prices are observed in a sequence of trading days. We compare the performance of the procedures for finite and infinite jump activity based on real option data.