Hyperbolic pricing model for options on KOSPI 200

In Suk Wee, Jung Bum Wee, Rae Hyoun Tak, Jong Hyun Lee

Research output: Contribution to journalArticlepeer-review

Abstract

We examine the statistical fitness of the option pricing model based on the hyperbolic distribution for Korea Composite Stock Price Index (KOSPI) 200. We estimate the parameters of the model, and develop the pricing formula for the European call option on KOSPI 200 using Esscher transform. We compute and compare the hyperbolic option prices with the prices predicted by the Black-Scholes model. The empirical results indicate that the hyperbolic model outperforms the Black-Scholes model for options on KOSPI 200..

Original languageEnglish
Pages (from-to)177-196
Number of pages20
JournalAsia-Pacific Journal of Financial Studies
Volume35
Issue number2
Publication statusPublished - 2006

Keywords

  • Black-Scholes model
  • Esscher transform
  • Hyperbolic model
  • Option price

ASJC Scopus subject areas

  • Finance

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