Pricing S&P 500 Index Options: A Conditional Semi-Nonparametric Approach
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We price S&P 500 index options under the assumption that the conditional risk-neutral density function of the index follows a Semi-Nonparametric (SNP) process with GARCH variance. The model is estimated combining a set of option contracts written on the index and the daily index return time series in the period 1996-2011. The in-sample and out-sample performance of the model is compared with several benchmark models, beating most of them. We conclude that a pricing model dealing simultaneously with non-normalities and time-varying volatility helps to mitigate the observed S&P 500 index option biases.
Artículo de publicación ISI
DOI: DOI: 10.1002/fut.21731
Quote ItemThe Journal of Futures Markets, Vol. 36, No. 3, 217–239 (2016)
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