Hyperbolic pricing model for options on KOSPI 200

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

Research output: Contribution to journalArticle

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 Dec 1

Fingerprint

Korea
Price index
Stock prices
Black-Scholes model
Call option
Empirical results
Option pricing model
Option prices
Pricing
Fitness
Esscher transform

Keywords

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

ASJC Scopus subject areas

  • Finance

Cite this

Wee, I-S., Wee, J. B., Tak, R. H., & Lee, J. H. (2006). Hyperbolic pricing model for options on KOSPI 200. Asia-Pacific Journal of Financial Studies, 35(2), 177-196.

Hyperbolic pricing model for options on KOSPI 200. / Wee, In-Suk; Wee, Jung Bum; Tak, Rae Hyoun; Lee, Jong Hyun.

In: Asia-Pacific Journal of Financial Studies, Vol. 35, No. 2, 01.12.2006, p. 177-196.

Research output: Contribution to journalArticle

Wee, I-S, Wee, JB, Tak, RH & Lee, JH 2006, 'Hyperbolic pricing model for options on KOSPI 200', Asia-Pacific Journal of Financial Studies, vol. 35, no. 2, pp. 177-196.
Wee, In-Suk ; Wee, Jung Bum ; Tak, Rae Hyoun ; Lee, Jong Hyun. / Hyperbolic pricing model for options on KOSPI 200. In: Asia-Pacific Journal of Financial Studies. 2006 ; Vol. 35, No. 2. pp. 177-196.
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