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Article Dans Une Revue Finance Research Letters Année : 2010

Martingalized Historical approach for Option Pricing

Résumé

In a discrete time option pricing framework, we compare the empirical performance of two pricing methodologies, namely the affine stochastic discount factor (SDF) and the empirical martingale correction methodologies. Using a CAC 40 options dataset, the differences are found to be small: the higher order moment correction involved in the SDF approach may not be that essential to reduce option pricing errors. This paper puts into evidence the fact that an appropriate modelling under the historical measure associated with an adequate correction (that we call here a ”martingale correction”) permits to provide option prices which are close to market ones.
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Dates et versions

halshs-00437927 , version 1 (02-12-2009)

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Christophe Chorro, Dominique Guegan, Florian Ielpo. Martingalized Historical approach for Option Pricing. Finance Research Letters, 2010, 7 (1), pp.24-28. ⟨10.1016/j.frl.2009.11.002⟩. ⟨halshs-00437927⟩
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