The Approximate Option Pricing Model: Performances and Dynamic Properties
Gunther Capelle-Blancard (),
Emmanuel Jurczenko and
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Emmanuel Jurczenko: ESCP-EAP - ESCP-EAP - Ecole Supérieure de Commerce de Paris
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Using high frequency data from ParisBourse SA, this article examines pricing and hedging performances of the Jarrow and Rudd (Journal of Financial Economics 10 (1982) pp. 347–369) model. We first find that this model improves the pricing of CAC 40 index European call options whether in-sample or out-of-sample, and whatever economic or statistic criterion may be used. Moreover, simple models for implied moments lead—in a dynamic setting—to results very close to those from in-sample optimization. But, we also find that this model does not improve hedging strategy and that the Black and Scholes (Journal of Political Economy (1973) pp. 637–655) model is still difficult to beat.
Keywords: Option pricing models; Volatility; Skewness; Kurtosis (search for similar items in EconPapers)
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Published in Journal of Multinational Financial Management, Elsevier, 2001, 11 (4-5), pp.427-443. <10.1016/S1042-444X(01)00031-7>
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Journal Article: The approximate option pricing model: performances and dynamic properties (2001)
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Persistent link: http://EconPapers.repec.org/RePEc:hal:cesptp:hal-00308985
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