H. Peter Boswijk, Roger J. A. Laeven, Evgenii Vladimirov
arXiv 12 Oct 2022 · Econometrics · publishedJournal of Econometrics (2024) · 3 citations (OpenAlex)
arXiv:2210.06217 · PDF · DOI · OpenAlex · Extracted main text
We develop a novel filtering and estimation procedure for parametric option pricing models driven by general affine jump-diffusions. Our procedure is based on the comparison between an option-implied, model-free representation of the conditional log-characteristic function and the model-implied conditional log-characteristic function, which is functionally affine in the model's state vector. We formally derive an associated linear state space representation and establish the asymptotic properties of the corresponding measurement errors. The state space representation allows us to use a suitably modified Kalman filtering technique to learn about the latent state vector and a quasi-maximum likelihood estimator of the model parameters, which brings important computational advantages. We analyze the finite-sample behavior of our procedure in Monte Carlo simulations. The applicability of our procedure is illustrated in two case studies that analyze S&P 500 option prices and the impact of exogenous state variables capturing Covid-19 reproduction and economic policy uncertainty.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | andersen2015parametric APACrefauthors Andersen, T G. , Fusari, N. \… (2015) 2015 1 | 1.000 | 7 | 4 | 100% |
| 2 | DPS2000 APACrefauthors Duffie, D. , Pan, J. \ Singleton, K. APACrefa… (2000) 2000 | 0.941 | 12 | 6 | 83% |
| 3 | todorov2019nonparametric APACrefauthors Todorov, V. APACrefauthors \ (2019) 2019 | 0.928 | 5 | 4 | 80% |
| 4 | heston1993 APACrefauthors Heston, S L. APACrefauthors \ (1993) 1993 | 0.928 | 5 | 3 | 80% |
| 5 | AFT2017 APACrefauthors Andersen, T G. , Fusari, N. \ Todorov, V. APA… (2017) 2017 | 0.928 | 4 | 3 | 100% |
| 6 | broadie2007model APACrefauthors Broadie, M. , Chernov, M. \ Johannes… (2007) 2007 | 0.928 | 4 | 3 | 100% |
| 7 | jong2000time APACrefauthors de Jong, F. APACrefauthors \ (2000) 2000 | 0.928 | 4 | 3 | 100% |
| 8 | pan2002 APACrefauthors Pan, J. APACrefauthors \ (2002) 2002 | 0.928 | 4 | 3 | 100% |
| 9 | bardgett2019inferring APACrefauthors Bardgett, C. , Gourier, E. \ Le… (2019) 2019 | 0.843 | 4 | 4 | 75% |
| 10 | piazzesi2010affine APACrefauthors Piazzesi, M. APACrefauthors \ (2010) 2010 | 0.843 | 3 | 3 | 100% |
Showing the top 10 of 71 scored citations.