Assessing the impact of jumps in an option pricing model: A gradient estimation approach

Warren Volk-Makarewicz, Svetlana Borovkova and Bernd Heidergott

European Journal of Operational Research, 2022, vol. 298, issue 2, 740-751

Abstract: Motivated by model risk considerations, we develop a statistical procedure that determines whether the inclusion of a jump component in a simpler, diffusion-based price model significantly influences the prices of specific options on this underlying.

Keywords: Finance; Model risk; Option pricing; Gradient estimation; t-test (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:298:y:2022:i:2:p:740-751

DOI: 10.1016/j.ejor.2021.07.015

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