SHORT‐MATURITY OPTIONS AND JUMP MEMORY

Tom Arnold, Jimmy E. Hilliard and Adam Schwartz

Journal of Financial Research, 2007, vol. 30, issue 3, 437-454

Abstract: We investigate jump memory using an extensive database of short‐term S&P 500 index options. Jump memory refers to the attenuation of the implied jump intensity and magnitude parameters following a crash event. We use a genetic algorithm to obtain a time series of implied parameter estimates and posit behavioral and rational explanations for parameter attenuation following a crash event. We find that a nested form of the jump‐diffusion model sharpens the remaining parameter estimates and has a negligible effect on pricing accuracy.

Date: 2007
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https://doi.org/10.1111/j.1475-6803.2007.00222.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:30:y:2007:i:3:p:437-454

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