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An Empirical Study of Option Prices under the Hybrid Brownian Motion Model

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DOI: 10.4236/jmf.2013.32033    4,044 Downloads   6,564 Views   Citations

ABSTRACT

In this paper, we mainly discuss an empirical study of option prices under the hybrid Brownian motion model developed by [1]. In a specific case of parameters, we have a simple transition probability density function that has a fattailed feature as time passes. We show some empirical evidences that the feature of the model reflects the real market price movements in Japanese stock market. Furthermore, we make a performance comparison between the hybrid model and the BS model using Nikkei 225 call options. In general our results show that the hybrid model is slightly better than the BS model.

Conflicts of Interest

The authors declare no conflicts of interest.

Cite this paper

H. Iwaki and L. Luo, "An Empirical Study of Option Prices under the Hybrid Brownian Motion Model," Journal of Mathematical Finance, Vol. 3 No. 2, 2013, pp. 329-334. doi: 10.4236/jmf.2013.32033.

References

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