This paper proposes a semiparametric option pricing model with liquidity, as proxied by the relative bid-ask spread. The nonparametric volatility function with liquidity as an explanatory variable is estimated using the Symmetrized Nearest Neighbors (SNN) estimator rather than the traditional...

Published as an article in: Investigaciones Economicas, 2005, vol. 29, issue 3, pages 483-523.

This paper presents a comparison of alternative option pricing models based either on jump-diffusion nor stochastic volatility data generating processes. We assume either a smooth volatility function of some previously defined explanatory variables or a model in which discrete-based observations...

The central point for the empirical testing of option pricing models is whether the actual distribution of the underlying asset implied by the option market data is consistent with the distribution assumed by the theoretical option pricing model. The well known volatility smile pattern suggests...