An Autoregressive Conditional Binomial Option Pricing Model
This paper offers an option pricing framework grounded in econometric microstructure modelling. We consider a model where stock price dynamics follow a pure jump process with constant jump size similar to a binomial setting with random time steps. Jump arrival times are described as an Autoregressive Conditional Duration (ACD) process while conditional probabilities of up-moves and down-moves are given by the logistic transformation of an autoregressive prices. We derive no-arbitrage pricing formulae under the minimal martingale measure and illustrate the use of our Autoregressive Conditional Binomial (ACB) option pricing model on intraday IBM stock date.
(This abstract was borrowed from another version of this item.)
|Date of creation:||1999|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 01 41 17 60 81
Web page: http://www.crest.fr
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:crs:wpaper:99-65. 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: (Florian Sallaberry)
If references are entirely missing, you can add them using this form.