Hyperbolic pricing model for options on KOSPI 200

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

    Research output: Contribution to journalArticlepeer-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 languageEnglish
    Pages (from-to)177-196
    Number of pages20
    JournalAsia-Pacific Journal of Financial Studies
    Volume35
    Issue number2
    Publication statusPublished - 2006

    Keywords

    • Black-Scholes model
    • Esscher transform
    • Hyperbolic model
    • Option price

    ASJC Scopus subject areas

    • Finance

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