IDEAS home Printed from https://ideas.repec.org/p/byu/byumcl/201208.html

Option Pricing and Distribution Characteristics

Author

Listed:
  • 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.

Suggested Citation

  • David J. Mauler & James B. McDonald, 2012. "Option Pricing and Distribution Characteristics," BYU Macroeconomics and Computational Laboratory Working Paper Series 2012-08, Brigham Young University, Department of Economics, BYU Macroeconomics and Computational Laboratory.
    • Handle: RePEc:byu:byumcl:201208
    as

    Download full text from publisher

    File URL: http://economics.byu.edu/Documents/Macro%20Lab/Working%20Paper%20Series/BYUMCL2012-08.pdf
    File Function: First version, 2012
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

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


    Cited by:

    1. is not listed on IDEAS
    2. Karagiorgis, Ariston & Drakos, Konstantinos, 2022. "The Skewness-Kurtosis plane for non-Gaussian systems: The case of hedge fund returns," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    3. Ariston Karagiorgis & Antonis Ballis & Konstantinos Drakos, 2024. "The Skewness‐Kurtosis plane for cryptocurrencies' universe," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2543-2555, April.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

    Statistics

    Access and download statistics

    Corrections

    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:byu:byumcl:201208. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kerk Phillips The email address of this maintainer does not seem to be valid anymore. Please ask Kerk Phillips to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/debyuus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.