Which Deterministic Volatility Model Fits Market Prices Exactly? : Evidence from the NIKKEI 225 Options Market(<Special English Issue>Optimization and Its Applications)

Hirofumi Hoshika; Koichi Miyazaki

doi:10.11221/jima.58.451

Journal of Japan Industrial Management Association

Online ISSN : 2187-9079
Print ISSN : 1342-2618
ISSN-L : 1342-2618

Which Deterministic Volatility Model Fits Market Prices Exactly? : Evidence from the NIKKEI 225 Options Market(<Special English Issue>Optimization and Its Applications)

Hirofumi Hoshika, Koichi Miyazaki

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Keywords: Optimization, NIKKEI 225 options, Market-based option pricing, deterministic volatility, skew, smile

JOURNAL FREE ACCESS

2008 Volume 58 Issue 6 Pages 451-458

DOI https://doi.org/10.11221/jima.58.451

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Abstract

This paper examines three kinds of deterministic volatility models. We identify the model that attains the most precise fit with options market prices, as required for accounting purposes, using an optimization model. We also draw attention to another important point in the selection of an appropriate option-pricing model.

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