Une application de la formule de Jarrow et Rudd aux options sur indice CAC 40

Gunther Capelle-Blancard and Emmanuel Jurczenko
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Emmanuel Jurczenko: TEAM - Théories et Applications en Microéconomie et Macroéconomie - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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Abstract: Many empirical studies pointed out that the Black-Scholes model led to a wrong evaluation of deep in-the-money options and deep out-the-money options. These biases are usually attributed to the hypothesis of log-normality of the underlying asset. In order to remove these biaises, Jarrow and Rudd (1982) propose to use a series expansion for the state price density. This approach allows to take non-normal skewness and kurtosis in asset returns into account. Using high frequency data from the SBF database, we examine the explicative and predictive performance of the Jarrow and Rudd option valuation. We find that Jarrow and Rudd's model improves the valuation of CAC 40 index option (PXL).

Keywords: option pricing models; density probability functions; volatility forecast; Edgeworth expansion; modèles d'évaluation d'options; fonction de densité de probabilité; prévision de volatilité; développement d'Edgeworth (search for similar items in EconPapers)
Date: 2000-01
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Published in 2000

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Related works:
Working Paper: Une application de la formule de Jarrow et Rudd aux options sur indice CAC 40 (2000)
Working Paper: Une application de la formule de Jarrow et Rudd aux options sur indice CAC 40 (2000)
Working Paper: Une application de la formule de Jarrow et Rudd aux options sur indice CAC 40 (1999)
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