Comparison of stochastic volatility models: Empirical study on kospi 200 index options

Kyoung Sook Moon; Jung Yon Seon; In Suk Wee; Choongseok Yoon

doi:10.4134/BKMS.2009.46.2.209

Comparison of stochastic volatility models: Empirical study on kospi 200 index options

Kyoung Sook Moon, Jung Yon Seon, In Suk Wee, Choongseok Yoon

* Honorary professors

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

We examine a unified approach of calculating the closed form solutions of option price under stochastic volatility models using stochastic calculus and the Fourier inversion formula. In particular, we review and derive the option pricing formulas under Heston and correlated Stein-Stein models using a systematic and comprehensive approach which were derived individually earlier. We compare the empirical performances of the two stochastic volatility models and the Black-Scholes model in pricing KOSPI 200 index options.

Original language	English
Pages (from-to)	209-227
Number of pages	19
Journal	Bulletin of the Korean Mathematical Society
Volume	46
Issue number	2
DOIs	https://doi.org/10.4134/BKMS.2009.46.2.209
Publication status	Published - 2009 Mar

Keywords

Correlated Stein-Stein model
Heston model
KOSPI 200 index option
Option pricing
Stochastic volatility model

ASJC Scopus subject areas

Mathematics(all)

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10.4134/BKMS.2009.46.2.209

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title = "Comparison of stochastic volatility models: Empirical study on kospi 200 index options",

abstract = "We examine a unified approach of calculating the closed form solutions of option price under stochastic volatility models using stochastic calculus and the Fourier inversion formula. In particular, we review and derive the option pricing formulas under Heston and correlated Stein-Stein models using a systematic and comprehensive approach which were derived individually earlier. We compare the empirical performances of the two stochastic volatility models and the Black-Scholes model in pricing KOSPI 200 index options.",

keywords = "Correlated Stein-Stein model, Heston model, KOSPI 200 index option, Option pricing, Stochastic volatility model",

author = "Moon, {Kyoung Sook} and Seon, {Jung Yon} and Wee, {In Suk} and Choongseok Yoon",

year = "2009",

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AU - Wee, In Suk

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AB - We examine a unified approach of calculating the closed form solutions of option price under stochastic volatility models using stochastic calculus and the Fourier inversion formula. In particular, we review and derive the option pricing formulas under Heston and correlated Stein-Stein models using a systematic and comprehensive approach which were derived individually earlier. We compare the empirical performances of the two stochastic volatility models and the Black-Scholes model in pricing KOSPI 200 index options.

KW - Correlated Stein-Stein model

KW - Heston model

KW - KOSPI 200 index option

KW - Option pricing

KW - Stochastic volatility model

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JF - Bulletin of the Korean Mathematical Society

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ER -

Comparison of stochastic volatility models: Empirical study on kospi 200 index options

Abstract

Keywords

ASJC Scopus subject areas

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