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Transaction Data Tests of S&P 100 Call Option Pricing

Published online by Cambridge University Press:  06 April 2009

Aamir M. Sheikh
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Abstract

This paper examines the pricing of S&P 100 calls using 14 months of transactions data. We find that market prices of S&P 100 calls differ systematically from Black-Scholes values. The biases in Black-Scholes model prices are both statistically and economically significant and correspond to biases that arise if market prices incorporate a stochastically changing volatility of the index.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 26 , Issue 4 , December 1991 , pp. 459 - 475
Copyright
Copyright © School of Business Administration, University of Washington 1991

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