Option calibration of exponential Lévy models: Implementation and empirical results

Details Option calibration of exponential Lévy models: Implementation and empirical results Option calibration of exponential Lévy models: Implementation and empirical results

2012-02-27

arxiv.org/abs/1202.5983v1

Economy

Quantitative Finance

Pricing of Securities

25 pages, 10 figures, 3 tables

Scientific paper

Observing prices of European put and call options, we calibrate exponential L\'evy models nonparametrically. We discuss the implementation of the spectral estimation procedures for L\'evy models of finite jump activity as well as for self-decomposable L\'evy models and improve these methods. Confidence intervals are constructed for the estimators in the finite activity case. They allow inference on the behavior of the parameters when the option prices are observed in a sequence of trading days. We compare the performance of the procedures for finite and infinite jump activity based on real option data.

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