Information-Time Option Pricing: Theory and Empirical Evidence
With a stochastic time change from calendar-time to information-time, we derive a parsimonious option pricing formula with stochastic volatility as a risk-neutral Poisson sum of Merton's (1973) prices over the option's information-time maturity domain. The formula contains two unobservable...
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Institutional Knowledge at Singapore Management University
1998
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| 在線閱讀: | https://ink.library.smu.edu.sg/lkcsb_research/2261 https://doi.org/10.1016/s0304-405x(98)00009-9 |
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sg-smu-ink.lkcsb_research-32602016-11-01T08:38:20Z Information-Time Option Pricing: Theory and Empirical Evidence CHANG, Carolyn W. CHANG, Jack S. K LIM, Kian Guan With a stochastic time change from calendar-time to information-time, we derive a parsimonious option pricing formula with stochastic volatility as a risk-neutral Poisson sum of Merton's (1973) prices over the option's information-time maturity domain. The formula contains two unobservable parameters, information arrival intensity and information-time asset volatility, with stochastic volatility induced by random information arrival. When the information arrival rate intensifies, the option price increases and vice-versa. We test the formula in pricing, hedging, and excess profits capture empirically using currency and the S&P 500 futures options transaction data 1998-05-01T07:00:00Z text https://ink.library.smu.edu.sg/lkcsb_research/2261 info:doi/10.1016/s0304-405x(98)00009-9 https://doi.org/10.1016/s0304-405x(98)00009-9 Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Information-time Information arrival speed Option pricing Stochastic time change Stochastic volatility Business Finance and Financial Management |
| institution |
Singapore Management University |
| building |
SMU Libraries |
| continent |
Asia |
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Singapore Singapore |
| content_provider |
SMU Libraries |
| collection |
InK@SMU |
| language |
English |
| topic |
Information-time Information arrival speed Option pricing Stochastic time change Stochastic volatility Business Finance and Financial Management |
| spellingShingle |
Information-time Information arrival speed Option pricing Stochastic time change Stochastic volatility Business Finance and Financial Management CHANG, Carolyn W. CHANG, Jack S. K LIM, Kian Guan Information-Time Option Pricing: Theory and Empirical Evidence |
| description |
With a stochastic time change from calendar-time to information-time, we derive a parsimonious option pricing formula with stochastic volatility as a risk-neutral Poisson sum of Merton's (1973) prices over the option's information-time maturity domain. The formula contains two unobservable parameters, information arrival intensity and information-time asset volatility, with stochastic volatility induced by random information arrival. When the information arrival rate intensifies, the option price increases and vice-versa. We test the formula in pricing, hedging, and excess profits capture empirically using currency and the S&P 500 futures options transaction data |
| format |
text |
| author |
CHANG, Carolyn W. CHANG, Jack S. K LIM, Kian Guan |
| author_facet |
CHANG, Carolyn W. CHANG, Jack S. K LIM, Kian Guan |
| author_sort |
CHANG, Carolyn W. |
| title |
Information-Time Option Pricing: Theory and Empirical Evidence |
| title_short |
Information-Time Option Pricing: Theory and Empirical Evidence |
| title_full |
Information-Time Option Pricing: Theory and Empirical Evidence |
| title_fullStr |
Information-Time Option Pricing: Theory and Empirical Evidence |
| title_full_unstemmed |
Information-Time Option Pricing: Theory and Empirical Evidence |
| title_sort |
information-time option pricing: theory and empirical evidence |
| publisher |
Institutional Knowledge at Singapore Management University |
| publishDate |
1998 |
| url |
https://ink.library.smu.edu.sg/lkcsb_research/2261 https://doi.org/10.1016/s0304-405x(98)00009-9 |
| _version_ |
1770570206916116480 |