%0 DATA
%A G.C., Lim
%A Gael M., Martin
%A V.L., Martin
%D 2017
%T Parametric Pricing of Higher Order Moments in S&p500 Options
%U https://monash.figshare.com/articles/Parametric_Pricing_of_Higher_Order_Moments_in_S_p500_Options/5072338
%R 10.4225/03/5934b4624c6b2
%2 https://monash.figshare.com/ndownloader/files/8587654
%K skewness
%K generalised Student t
%K 1959.1/2307
%K 2002
%K kurtosis and time-varying volatility
%K Option pricing
%K volatility smiles and skews
%K monash:2307
%X A general parametric framework is developed for pricing S&P500 options. Skewness and leptokurtosis in stock returns as well as time-varying volatility are priced. The parametric pricing model nests the Black-Scholes model and can explain volatility smiles and skews in stock options. The data consist of S&P500 options traded on select days in April, 1995, a total sample of over 500,000 observations. A number of performance criteria are used to evaluate the alternative models. The empirical results show that pricing higher order moments yield improvements in the pricing of options over the Black-Scholes model as well as other models.