Empirical Perormance of the Variance Gamma Option Pricing Moadel
碩士 === 國立中正大學 === 財務金融所 === 94 === Abstract This paper tests the performance of Factor Models( vgsi ) of Carr and Madan (2000) that is a variance gamma option pricing model with a different view. We argue that the larger the pricing error, the more successful a model might be. Because the potential...
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| Format: | Others |
| Language: | en_US |
| Online Access: | http://ndltd.ncl.edu.tw/handle/00761878805354577301 |
| Summary: | 碩士 === 國立中正大學 === 財務金融所 === 94 === Abstract
This paper tests the performance of Factor Models( vgsi ) of Carr and Madan (2000) that is a variance gamma option pricing model with a different view. We argue that the larger the pricing error, the more successful a model might be. Because the potential profits are derived from the deviations between a model and market price. We used daily data on Taiwan Stock Exchange Capitalization Weighted Stock Index options (TXO) which are of European style. For testing whether the vgsi models applied to TXO can be arbitraged. We used a different view to test the performance vgsi pricing model based trading strategies whether transaction costs and hedging are considered or not. `As the results indicate that the potential profits of option trading derived from the deviations between option pricing model and market price. Moreover, it will increase in the size of the errors.
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