Hyperbolic pricing model for options on KOSPI 200

In Suk Wee; Jung Bum Wee; Rae Hyoun Tak; Jong Hyun Lee

Hyperbolic pricing model for options on KOSPI 200

In Suk Wee, Jung Bum Wee, Rae Hyoun Tak, Jong Hyun Lee

Research output: Contribution to journal › Article › peer-review

Abstract

We examine the statistical fitness of the option pricing model based on the hyperbolic distribution for Korea Composite Stock Price Index (KOSPI) 200. We estimate the parameters of the model, and develop the pricing formula for the European call option on KOSPI 200 using Esscher transform. We compute and compare the hyperbolic option prices with the prices predicted by the Black-Scholes model. The empirical results indicate that the hyperbolic model outperforms the Black-Scholes model for options on KOSPI 200..

Original language	English
Pages (from-to)	177-196
Number of pages	20
Journal	Asia-Pacific Journal of Financial Studies
Volume	35
Issue number	2
Publication status	Published - 2006

Keywords

Black-Scholes model
Esscher transform
Hyperbolic model
Option price

ASJC Scopus subject areas

Finance

Cite this

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title = "Hyperbolic pricing model for options on KOSPI 200",

abstract = "We examine the statistical fitness of the option pricing model based on the hyperbolic distribution for Korea Composite Stock Price Index (KOSPI) 200. We estimate the parameters of the model, and develop the pricing formula for the European call option on KOSPI 200 using Esscher transform. We compute and compare the hyperbolic option prices with the prices predicted by the Black-Scholes model. The empirical results indicate that the hyperbolic model outperforms the Black-Scholes model for options on KOSPI 200..",

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author = "Wee, {In Suk} and Wee, {Jung Bum} and Tak, {Rae Hyoun} and Lee, {Jong Hyun}",

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AU - Wee, Jung Bum

AU - Tak, Rae Hyoun

AU - Lee, Jong Hyun

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N2 - We examine the statistical fitness of the option pricing model based on the hyperbolic distribution for Korea Composite Stock Price Index (KOSPI) 200. We estimate the parameters of the model, and develop the pricing formula for the European call option on KOSPI 200 using Esscher transform. We compute and compare the hyperbolic option prices with the prices predicted by the Black-Scholes model. The empirical results indicate that the hyperbolic model outperforms the Black-Scholes model for options on KOSPI 200..

AB - We examine the statistical fitness of the option pricing model based on the hyperbolic distribution for Korea Composite Stock Price Index (KOSPI) 200. We estimate the parameters of the model, and develop the pricing formula for the European call option on KOSPI 200 using Esscher transform. We compute and compare the hyperbolic option prices with the prices predicted by the Black-Scholes model. The empirical results indicate that the hyperbolic model outperforms the Black-Scholes model for options on KOSPI 200..

KW - Black-Scholes model

KW - Esscher transform

KW - Hyperbolic model

KW - Option price

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Hyperbolic pricing model for options on KOSPI 200

Abstract

Keywords

ASJC Scopus subject areas

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