Heterogeneous information arrival and option pricing:
We model the arrival of heterogeneous information in a financial market as a doubly-stochastic Poisson process (DSPP). A DSPP is a member of the family of Poisson processes in which the mean value of the process itself is governed by a stochastic mechanism. We explore the implications for pricing st...
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| Main Authors: | , |
|---|---|
| Format: | Book |
| Language: | English |
| Published: |
Cambridge, Mass.
1997
|
| Series: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
5950 |
| Subjects: | |
| Online Access: | Volltext |
| Summary: | We model the arrival of heterogeneous information in a financial market as a doubly-stochastic Poisson process (DSPP). A DSPP is a member of the family of Poisson processes in which the mean value of the process itself is governed by a stochastic mechanism. We explore the implications for pricing stock, index and foreign currency options of the assumption that the under- lying security evolves as a mixed diffusion DSPP. We derive an intertemporal CAPM and demonstrate that accounting for heterogeneous information arrival may minimize the ubiquitous pricing bias 'smile-effect' of standard option pricing models. We propose a conceptually simple but numerically intensive maximum likelihood estimator of the parameters of a DSPP. A simulation study verifies the adequacy of the asymptotic approximations in finite samples. |
| Physical Description: | 35 S. |
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| 520 | |a We model the arrival of heterogeneous information in a financial market as a doubly-stochastic Poisson process (DSPP). A DSPP is a member of the family of Poisson processes in which the mean value of the process itself is governed by a stochastic mechanism. We explore the implications for pricing stock, index and foreign currency options of the assumption that the under- lying security evolves as a mixed diffusion DSPP. We derive an intertemporal CAPM and demonstrate that accounting for heterogeneous information arrival may minimize the ubiquitous pricing bias 'smile-effect' of standard option pricing models. We propose a conceptually simple but numerically intensive maximum likelihood estimator of the parameters of a DSPP. A simulation study verifies the adequacy of the asymptotic approximations in finite samples. | ||
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| id | DE-604.BV011678430 |
| illustrated | Not Illustrated |
| indexdate | 2024-07-09T18:13:53Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-007873054 |
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| physical | 35 S. |
| publishDate | 1997 |
| publishDateSearch | 1997 |
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| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Asea, Patrick K. Verfasser aut Heterogeneous information arrival and option pricing Patrick K. Asea ; Mthuli Ncube Cambridge, Mass. 1997 35 S. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 5950 We model the arrival of heterogeneous information in a financial market as a doubly-stochastic Poisson process (DSPP). A DSPP is a member of the family of Poisson processes in which the mean value of the process itself is governed by a stochastic mechanism. We explore the implications for pricing stock, index and foreign currency options of the assumption that the under- lying security evolves as a mixed diffusion DSPP. We derive an intertemporal CAPM and demonstrate that accounting for heterogeneous information arrival may minimize the ubiquitous pricing bias 'smile-effect' of standard option pricing models. We propose a conceptually simple but numerically intensive maximum likelihood estimator of the parameters of a DSPP. A simulation study verifies the adequacy of the asymptotic approximations in finite samples. Mathematisches Modell Information theory in finance Options (Finance) Mathematical models Ncube, Mthuli 1964- Verfasser (DE-588)170931102 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 5950 (DE-604)BV002801238 5950 http://papers.nber.org/papers/w5950.pdf kostenfrei Volltext |
| spellingShingle | Asea, Patrick K. Ncube, Mthuli 1964- Heterogeneous information arrival and option pricing National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Mathematisches Modell Information theory in finance Options (Finance) Mathematical models |
| title | Heterogeneous information arrival and option pricing |
| title_auth | Heterogeneous information arrival and option pricing |
| title_exact_search | Heterogeneous information arrival and option pricing |
| title_full | Heterogeneous information arrival and option pricing Patrick K. Asea ; Mthuli Ncube |
| title_fullStr | Heterogeneous information arrival and option pricing Patrick K. Asea ; Mthuli Ncube |
| title_full_unstemmed | Heterogeneous information arrival and option pricing Patrick K. Asea ; Mthuli Ncube |
| title_short | Heterogeneous information arrival and option pricing |
| title_sort | heterogeneous information arrival and option pricing |
| topic | Mathematisches Modell Information theory in finance Options (Finance) Mathematical models |
| topic_facet | Mathematisches Modell Information theory in finance Options (Finance) Mathematical models |
| url | http://papers.nber.org/papers/w5950.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT aseapatrickk heterogeneousinformationarrivalandoptionpricing AT ncubemthuli heterogeneousinformationarrivalandoptionpricing |