Simulated testing of nonparametric measure changes for hedging European options

Smith, Godfrey

doi:10.1016/j.frl.2012.11.002

Cited by 2 publications

(1 citation statement)

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“…We also find that the static and dynamic delta-hedging performance of these non-parametric schemes are comparable to those of the common parametric schemes. Similar to the findings relating to hedging of European-style options (Alcock and Smith, 2014;Smith, 2013), the differences in pricing performance between the various methods do not necessarily translate into differences in static and dynamic delta-hedging performance. We also find that this suite of non-parametric methods nicely captures the volatility-smile and term-structure of traded options.…”

Section: Introductionsupporting

confidence: 58%

Non-parametric American option valuation using Cressie–Read divergences

Alcock

Smith

2016

Australian Journal of Management

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In this paper we build on the possibility that the use of the Cressie–Read family with the non-parametic method for valuing European option might be extended to non-parametric valuation of American options. We derive a suite of non-parametric methods to price and hedge American-style options, utilising the Cressie-Read family of divergences. We test the efficacy of these methods using a large sample of traded American-style options struck on the S&P100 index. We find that in general, our suite of non-parametric valuation schemes generate more accurate price estimates than traditional parametric schemes, especially for longer-dated options.

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Section: Introductionsupporting

confidence: 58%