An Autoregressive Conditional Binomial Option Pricing Model
Olivier Renault,
Jean-Luc Prigent and
Olivier Scaillet
FMG Discussion Papers from Financial Markets Group
Abstract:
This paper offers an option pricing framework grounded in econometric microstructure modelling. We consider a model where stock price dynamics follow a pure jump process with constant jump size similar to a binomial setting with random time steps. Jump arrival times are described as an Autoregressive Conditional Duration (ACD) process while conditional probabilities of up-moves and down-moves are given by the logistic transformation of an autoregressive prices. We derive no-arbitrage pricing formulae under the minimal martingale measure and illustrate the use of our Autoregressive Conditional Binomial (ACB) option pricing model on intraday IBM stock date.
Date: 2000-11
References: Add references at CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmg_pdfs/dp364.pdf (application/pdf)
Related works:
Working Paper: An auto-regressive conditional binomial option pricing model (2000)
Working Paper: An Autoregressive Conditional Binomial Option Pricing Model (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:fmg:fmgdps:dp364
Access Statistics for this paper
More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration (fmg@lse.ac.uk).