Bakshi, Gurdip; Cao, Charles; Chen, Zhiwu - In: Journal of Finance 52 (1997) 5, pp. 2003-49
Substantial progress has been made in developing more realistic option pricing models. Empirically, however, it is not known whether and by how much each generalization improves option pricing and hedging. The authors fill this gap by first deriving an option model that allows volatility,...