Option Pricing Model Biases: Bayesian and Markov Chain Monte Carlo Regression Analysis
| Autor: | Sharif Mozumder, Taufiq Choudhry, Michael Dempsey |
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| Rok vydání: | 2020 |
| Předmět: |
Stochastic volatility
Economics Econometrics and Finance (miscellaneous) Regression analysis Markov chain Monte Carlo Black–Scholes model Statistics::Computation Computer Science Applications symbols.namesake Valuation of options Ordinary least squares Econometrics symbols Bayesian linear regression Moneyness Mathematics |
| Zdroj: | Computational Economics. 57:1287-1305 |
| ISSN: | 1572-9974 0927-7099 |
| DOI: | 10.1007/s10614-020-10029-x |
| Popis: | We investigate systematic and unsystematic option pricing biases in (a) pure jump Levy, (b) jump-diffusion, (c) stochastic volatility, and (d) GARCH models applied to the Black–Scholes–Merton model. We use options data for trades on the S&P500 index from the CBOE. In addition to standard ordinary least square regression, we employ Bayesian regression and Markov Chain Monte Carlo regression to investigate the moneyness and maturity biases of the models. We demonstrate the usefulness of these advanced methodologies as compared to the benchmark techniques. |
| Databáze: | OpenAIRE |
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