Short Maturity Options and Jump Memory
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چکیده
We investigate “jump memory” using an extensive data base of short-term S&P 500 Index options. Jump memory refers to the attenuation of the implied jump intensity and magnitude parameters following a jump event. Behavioral and rational explanations for parameter attenuation are posited. A genetic algorithm is used to obtain implied parameter estimates. The pricing accuracy of the jump-diffusion model under nesting and parameter restrictions is also investigated. Nesting and parameter restrictions sharpens the remaining parameter estimates and has a negligible effect on pricing accuracy.
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