Pricing Options with Nonnormal Distribution Using Binomial Tree Approach
- 발행기관 서강대학교 국제대학원
- 지도교수 김유경
- 발행년도 2005
- 학위수여년월 200508
- 학위명 석사
- 학과 및 전공 국제대학원
- 식별자(기타) 000000084752
- 본문언어 영어
목차
This thesis attempts to provide an easily implemented binomial option pricing model with underlying asset return’s nonnormal distribution which is specified by its skewness and kurtosis. Given the prespecified skewness and kurtosis, an Edgeworth expansion can be used to transform a normal density into a discrete Edgeworth nonnormal density. Using the Edgeworth discrete density rather than the normal density, options can be priced with nonnormal return distribution by Edgeworth binomial tree approach. This thesis improved Edgeworth binomial option pricing model in three aspects: First, extending the model to a given continuous dividend case; Second, giving an American option price method with nonnormal return distribution using Edgeworth binomial tree approach; Third, relaxing its assumption further to non-parametric option pricing model by binomial tree approach where the underlying return distribution can be arbitrarily given. Furthermore, visual basic application coding are developed for all of these option pricing models by user-defined function forms. Using these user-defined functions, empirical studies are implemented on KOSPI 200 index option. The empirical study on KOSPI 200 index option shows that Edgeworth option pricing model which captures the nonnormality of the underlying return distribution performs better than the standard binomial option pricing model. The underlying asset return distribution’s skewness and kurtosis contribute a lot to the market volatility smile. Therefore, Edgeworth binomial option pricing model gives a more desirable option pricing model by eliminating the market volatility smile.
