Comparison of stochastic volatility models: Empirical study on KOSPI 200 index options
Bull. Korean Math. Soc. 2009 Vol. 46, No. 2, 209-227
https://doi.org/10.4134/BKMS.2009.46.2.209
Printed March 1, 2009
Kyoung-Sook Moon, Jung-Yon Seon, In-Suk Wee, and Choongseok Yoon
Kyungwon University, Korea University, and Korea University
Abstract : We examine a unified approach of calculating the closed form solutions of option price under stochastic volatility models using stochastic calculus and the Fourier inversion formula. In particular, we review and derive the option pricing formulas under Heston and correlated Stein-Stein models using a systematic and comprehensive approach which were derived individually earlier. We compare the empirical performances of the two stochastic volatility models and the Black-Scholes model in pricing KOSPI 200 index options.
Keywords : option pricing, stochastic volatility model, Heston model, correlated Stein-Stein model, KOSPI 200 index option
MSC numbers : Primary 91B28, 65C20
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