Martingalized Historical approach for Option Pricing
In a discrete time option pricing framework, we compare the empirical performance of two pricing methodologies, namely the affine stochastic discount factor 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.
|Date of creation:||Apr 2009|
|Date of revision:|
|Note:||View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00376756|
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Documents de travail du Centre d'Economie de la Sorbonne
b08037, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
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