Martingalized Historical approach for Option Pricing

Christophe Chorro (), Dominique Guegan () and Florian Ielpo
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Christophe Chorro: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Dominique Guegan: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: In a discrete time option pricing framework, we compare the empirical performance of two pricing methodologies, namely the affine stochastic discount factor and the empirical martingale correction methodologies. Using a CAC 40 options dataset, the differences are found to be small : the higher order moment correction involved in the SDF approach may not be that essential to reduce option pricing errors.

Keywords: Generalized hyperbolic distribution; option pricing; incomplete market; CAC 40; Stochastic Discount Factor; martingale correction.; martingale correction; Distribution hyperbolique généralisée; pricing; options; marchés incomplets; martingalisation. (search for similar items in EconPapers)
Date: 2009-04
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00376756v1
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Published in 2009

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Related works:
Journal Article: Martingalized historical approach for option pricing (2010)
Working Paper: Martingalized Historical approach for Option Pricing (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00376756

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