IDEAS home Printed from
   My bibliography  Save this article

Evidence On Delta Hedging And Implied Volatilities For The Black-Scholes, Gamma, And Weibull Option Pricing Models


  • Robert Savickas


Modifying the distributional assumptions of the Black-Scholes model is one way to accommodate the skewness of underlying asset returns. Simple models based on the compensated gamma and Weibull distributions of asset prices are shown to produce some improvements in option pricing. To evaluate these assertions, I construct and compare delta hedges of all S&P 500 options traded on the Chicago Board Options Exchange between September 2001 and October 2003 for the Weibull, Black-Scholes, and gamma models. I also compare implied volatilities and their smiles (i.e., nonlinearities) among the three models. None of the three models improves over the others as far as delta hedging is concerned. Volatilities implied by all three models exhibit statistically significant smiles. 2005 The Southern Finance Association and the Southwestern Finance Association.

Suggested Citation

  • Robert Savickas, 2005. "Evidence On Delta Hedging And Implied Volatilities For The Black-Scholes, Gamma, And Weibull Option Pricing Models," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 28(2), pages 299-317.
  • Handle: RePEc:bla:jfnres:v:28:y:2005:i:2:p:299-317

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Talbot, Edward & Artiach, Tracy & Faff, Robert, 2013. "What drives the commodity price beta of oil industry stocks?," Energy Economics, Elsevier, vol. 37(C), pages 1-15.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jfnres:v:28:y:2005:i:2:p:299-317. 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.