Model Uncertainty And Option Markets With Heterogeneous Beliefs  

Oleh:

Buraschi, Andrea ; Jiltsov, Alexei

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 61 no. 6 (Des. 2006), page 2841-2898.
Topik: market; studies; option markets; securities trading volume; mathematical models; rates of return
Fulltext: p 2841.pdf (624.07KB)

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Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

This paper provide option pricing and volume implications for an economy with heterogeneous agents who face model uncertainty and have different beliefs on expected returns. Market incompleteness makes options nonredundant, while heterogeneity creates a link between differences in beliefs and option volume. We solve for both option prices and volumes and test the joint empirical implications using S & P 500 index option data. Specifically, we use survey data to build an index of dispersion in beliefs and find that a model that takes information heterogeneity into account can explain the dynamics of option volume and the smile better than can reduced form models with stochastic volatility.

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