Mispricing in Option Pricing Models Versus Market Payoffs: An Efficiency‐Based Performance Metric
Choice of the performance metric is a crucial part of empirical assessment of option pricing model performance and benchmarking, mainly because the outcome is subject to change based on the metric. Usage of performance metrics in the empirical option pricing literature is examined and their agreemen...
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| Veröffentlicht in: | Wilmott (London, England) England), 2017-11, Vol.2017 (92), p.44-57 |
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| container_title | Wilmott (London, England) |
| container_volume | 2017 |
| creator | Orbay, Berk Güllü, Refık Hörmann, Wolfgang |
| description | Choice of the performance metric is a crucial part of empirical assessment of option pricing model performance and benchmarking, mainly because the outcome is subject to change based on the metric. Usage of performance metrics in the empirical option pricing literature is examined and their agreement is assessed. We also propose new metrics based on market efficiency tests for more robust assessment and to eliminate the confusion of metric choice. We claim that efficiency metrics are the better choice if the objective is to evaluate option models with their financial outcome, not just price fitting. |
| doi_str_mv | 10.1002/wilm.10633 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 1540-6962 |
| ispartof | Wilmott (London, England), 2017-11, Vol.2017 (92), p.44-57 |
| issn | 1540-6962 1541-8286 |
| language | eng |
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| source | Alma/SFX Local Collection |
| subjects | Business metrics Financial performance Market economies market efficiency option pricing Options trading Payoffs pricing error Pricing policies |
| title | Mispricing in Option Pricing Models Versus Market Payoffs: An Efficiency‐Based Performance Metric |
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