This study compares the out-of-sample performances among Black-Scholes (B-S), Stochastic Volatility (SV) and Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models in the Taiwan option market. Using Absolute Relative Pricing Error (ARPE) as the performance criterion, the...

The prospect theory proposed by (Kahneman and Tversky, 1979) stated that people are risk-averse when faced with profits and risk-loving when faced with loss. Benartzi and Thaler (1995) combined the Myopic Loss Aversion and Mental Accounting in explaining the equity premium puzzle. Gneezy and...