Working Papers

The WNE Working Papers series has been published by the Faculty of Economic Sciences at the University of Warsaw since 2008.

The WNE Working Papers series provides a fast, open channel for disseminating research conducted at the Faculty of Economic Sciences, University of Warsaw. The papers hosted here are working versions (pre-prints) and may evolve as authors refine their analyses, incorporate feedback, or progress through formal peer-review. What you read is the current version released by the authors, timestamped and assigned DOI/ISSN identifiers to ensure precise citation and version tracking. Copyright remains with the authors, who may, at any time, upload a revised file or add a note directing readers to a later, peer-reviewed publication.

The Working Papers series accepts articles by research employees of the Faculty and publications from conferences organised at the Faculty of Economic Sciences at the University of Warsaw. Articles should be original research papers which have not been previously published, on the subject of economics.

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Please send 2 files:

(1) the main text without the title of the article and the authors (DOC/DOCX file) and

(2) the title page including: the title of the paper, the authors and their affiliation (DOC/DOCX file).

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Number of Results 2

WP(16/2010)39. Which Option Pricing Model is the Best? High Frequency Data for Nikkei225 Index Options

Authors: Kokoszczyński Ryszard, Sakowski Paweł, Ślepaczuk Robert
Option pricing models are the main subject of many research papers prepared both in academia and financial industry. Using high-frequency data for Nikkei225 index options, we check the properties of option pricing models with different assumptions co…

WP39. Which Option Pricing Model is the Best? High Frequency Data for Nikkei225 Index Options

Option pricing models are the main subject of many research papers prepared both in academia and financial industry. Using high-frequency data for Nikkei225 index options, we check the properties of option pricing models with different assumptions concerning the volatility process (historical, realized, implied, stochastic or based on GARCH model). In order to relax the continuous dividend payout assumption, we use the Black model for pricing options on futures, instead of the Black-Scholes-Merton model. The results are presented separately for 5 classes of moneyness ratio and 5 classes of time to maturity in order to show some patterns in option pricing and to check the robustness of our results. The Black model with implied volatility (BIV) comes out as the best one. Highest average pricing errors we obtain for the Black model with realized volatility (BRV). As a result, we do not see any additional gain from using more complex and time-consuming models (SV and GARCH models. Additionally, we describe liquidity of the Nikkei225 option pricing market and try to compare our results with a detailed study for the emerging market of WIG20 index options (Kokoszczyński et al. 2010b).


Kokoszczyński Ryszard, Sakowski Paweł, Ślepaczuk Robert
option pricing models financial market volatility high-frequency financial data midquotes data transactional data realized volatility implied volatility stochastic volatility microstructure bias emerging markets

WP(15/2010)38. Midquotes or Transactional Data? The Comparison of Black Model on HF Data

Authors: Kokoszczyński Ryszard, Sakowski Paweł, Ślepaczuk Robert
The main idea of this research is to check the efficiency of the Black option pricing model on the basis of HF emerging market data. However, liquidity constraints - a typical feature of an emerging derivatives market - put severe limits for conducti…

WP38. Midquotes or Transactional Data? The Comparison of Black Model on HF Data

The main idea of this research is to check the efficiency of the Black option pricing model on the basis of HF emerging market data. However, liquidity constraints - a typical feature of an emerging derivatives market - put severe limits for conducting such a study. That is the reason why Kokoszczynski et al., 2010, have conducted their earlier research on midquotes data treating them as potential transactional data. They have got some intriguing conclusions about implementing different volatility processes into the Black option model. Nevertheless, taking into account that midquotes do not have to be the proper representation of market prices as probably transactional data do, we decide to compare in this paper the results of the research conducted on HF transactional and midquotes data. This comparison shows that the results do not differ significantly between these two approaches and that BIV model significantly outperforms other models, especially BRV model with the latter producing the worst results. Additionally, we provide the discussion of liquidity issue in the context of emerging derivatives market. Finally, after exclusion of spurious outliers we observe significant patterns in option pricing that are not visible on the raw data.


Kokoszczyński Ryszard, Sakowski Paweł, Ślepaczuk Robert
option pricing models financial market volatility high-frequency financial data midquotes data transactional data realized volatility implied volatility microstructure bias emerging markets
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