What Type of Process Underlies Options ? A Simple Robust Test  

Oleh:

Carr, Peter ; Liuren, Wu

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 58 no. 6 (2003), page 2581-2610.
Topik: robust; studies; options trading; methods; processes; indexes; hedging
Fulltext: p 2581.pdf (466.29KB)

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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

We develop a simple robust method to distinguish the presence of continuous and discontinuous components in the price of an asset underlying optionss. Our method examines the prices of at the money and out of the money options as the option's time ot matturity approaches zero. We show that these prices converge to zero at speeds that depend upon whether the underlying asset price process is purely continuous, purely discontinuous or a combination of both. We apply the method to S & P 500 index options and find the existence of both a continuous component and a jump component in the index.

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