By extending the GARCH option pricing model of Duan (1995) to more flexible volatility estimation it is shown that the … pronounced leverage effect, simulated threshold GARCH option prices are substantially closer to observed market prices than the …

: Whether in risk management, portfolio hedging, or option pricing, we need to have a precise notion of the market's expectation … solved for the constant volatility parameter a using observed option prices. This is a more natural approach as the option … used as an indicator for market expectations over the remaining lifetime of the option. It is well known that the …

linear AR(l) conditional mean, one may ask how this predictability affects option prices. We investigate the dependence of … option prices on autoregressive dynamics under stylized facts of stock returns, i.e., conditional heteroskedasticity … suggest that a non-zero autoregression coefficient tends to increase the deviation of option prices from Black & Scholes …

-gamma neutral, vega sensitive option portfolios. -- Common Principal Component Analysis ; Implied Volatility Surface ; Principal …

Using option prices the expectations of the market participants concerning the underlying asset can be extracted as …