Title: Implied Volatility Trees and Pricing Performance: Evidence from the S&P 100 Options
Abstract: This paper examines the pricing performance of various discrete-time option models that accept the variation of implied volatilities with respect to the strike price and the time-to-maturity of the option (implied volatility tree models). To this end, data from the S&P 100 options are employed for the first time. The complex implied volatility trees are compared to the standard Cox-Ross-Rubinstein model and the ad-hoc traders model. Various criteria and interpolation methods are used to evaluate the performance of the models. The results have important implications for the pricing accuracy of the models under scrutiny and their implementation.
Publication Year: 2005
Publication Date: 2005-12-12
Language: en
Type: article
Access and Citation
AI Researcher Chatbot
Get quick answers to your questions about the article from our AI researcher chatbot