IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01529378.html
   My bibliography  Save this paper

Pricing CAC 40 Index Options with Stochastic Volatility

Author

Listed:
  • Sofiane Aboura

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper fulfills the lack of option pricing empirical studies devoted to the French market and is also the first paper that brings a comparison between the Heston (1993) closed-form solution model and the Hull and White (1988) model, built in a series expansion form. The empirical study is carried out on French PXL European call options written on the CAC 40 index during the first half of 2001. We discuss calibration and results obtained from the out-of-sample pricing using analysis in cross-section. We also discuss the empirical dynamic of the skew. We found that misprising was globally decreasing with maturity and low strike prices. We found that both models offered comparable pricing performance except for the short-term contracts and deep-out-the-money calls where the Hull and White (1988) model failed much more that the Heston (1993) model. To fit the implied volatility dynamic, the Heston (1993) model allows smile patterns to transform into skew patterns while the Hull and White (1988) model allows only for changes in the skew slope sign. However, we show that this is linked with the values of the structural parameters.

Suggested Citation

  • Sofiane Aboura, 2005. "Pricing CAC 40 Index Options with Stochastic Volatility," Post-Print hal-01529378, HAL.
    • Handle: RePEc:hal:journl:hal-01529378
    DOI: 10.1142/S0219868105000343
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    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:hal:journl:hal-01529378. 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: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.