Abstract

https://ssrn.com/abstract=2520032
 


 



Option Pricing under Skewness and Kurtosis Using a Cornish Fisher Expansion


Sofiane Aboura


Université Paris XIII Nord - Department of Economics and Management

Didier Maillard


Conservatoire National des Arts et Métiers (CNAM); Amundi Asset Management

December 18, 2014


Abstract:     
This paper revisits the pricing of options, in a context of financial stress, when the underlying asset’s returns displays skewness and excess kurtosis. For that purpose, we use a Cornish-Fisher transformation for valuing option contracts with an exact formula allowing for heavy-tails.

An application to the FTSE 100 stock index option contracts during October 2008 provides evidence about the capability of the Cornish-Fisher model to improve calibration and pricing performance during a volatile period.

Number of Pages in PDF File: 18

Keywords: Option pricing, Cornish-Fisher, Skewness, Kurtosis, Tail Risk

JEL Classification: C02, G11, G12, G21


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Date posted: November 7, 2014 ; Last revised: June 21, 2015

Suggested Citation

Aboura, Sofiane and Maillard, Didier, Option Pricing under Skewness and Kurtosis Using a Cornish Fisher Expansion (December 18, 2014). Available at SSRN: https://ssrn.com/abstract=2520032 or http://dx.doi.org/10.2139/ssrn.2520032

Contact Information

Sofiane Aboura
Université Paris XIII Nord - Department of Economics and Management ( email )
99 avenue Jean-Baptiste
Clément, Villetaneuse 93430
France
Didier Maillard (Contact Author)
Conservatoire National des Arts et Métiers (CNAM) ( email )
292, rue Saint-Martin
Paris cedex 03, 75141
France
Amundi Asset Management ( email )
90 Boulevard Pasteur
Paris, 75015
France
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