Advanced Search
MyIDEAS: Login

Option Pricing and Distribution Characteristics

Contents:

Author Info

  • David J. Mauler

    ()
    (Department of Economics, Brigham Young University)

  • James B. McDonald

    ()
    (Department of Economics, Brigham Young University)

Abstract

A number of flexible distributions (generalized beta of the second kind, inverse hyperbolic sine, g-and-h, Weibull, Burr-3, Burr-12, generalized gamma) are examined in the setting of option-pricing to explore potential improvements over the standard assumption of lognormal returns. Price formulas are presented specific to each assumed distributional form. The IHS option price formula has not previously been presented in the literature. An empirical application follows where implied risk-neutral density functions for each distribution are estimated from options on the S&P 500 Index. The distributions' performance relative to one another is then evaluated, with the GB2 appearing to be the most attractive choice.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://economics.byu.edu/Documents/Macro%20Lab/Working%20Paper%20Series/BYUMCL2012-08.pdf
File Function: First version, 2012
Download Restriction: no

Bibliographic Info

Paper provided by Brigham Young University, Department of Economics, BYU Macroeconomics and Computational Laboratory in its series BYU Macroeconomics and Computational Laboratory Working Paper Series with number 2012-08.

as in new window
Length: 19 pages
Date of creation: Nov 2012
Date of revision:
Handle: RePEc:byu:byumcl:201208

Contact details of provider:
Postal: 130 Faculty Office Building, P.O. Box 22363, Brigham Young University, Provo, Utah 84602
Phone: (801) 422-2859
Fax: (801) 422-0194
Web page: https://economics.byu.edu/Pages/MacroLab/Home.aspx
More information through EDIRC

Related research

Keywords: Option Pricing; Implied Distributions; Generalized Distributions;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:byu:byumcl:201208. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kerk Phillips).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.