A test of the Asay model for pricing options on the SPI futures contract

C. A. Brown, S. D. Taylor

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

Abstract

The Sydney Futures Exchange is one of the few exchanges world-wide where the options traded on the exchange are subject to futures-style margining. In this paper the valuation equation relating to pure futures options (the Asay model) is reviewed and the pricing performance of the model is examined on transaction prices from the SPI futures option market for the period from 1 June 1993 through to 30 June 1994. The Asay model is shown to generate significant pricing errors. These errors are related to the degree of moneyness and the maturity of the option. The errors are consistent with an observed smile in the implied volatilities.

Original languageEnglish
Pages (from-to)579-594
Number of pages16
JournalPacific Basin Finance Journal
Volume5
Issue number5
DOIs
Publication statusPublished - 1 Jan 1997

Keywords

  • Asay model
  • Futures options
  • G13
  • Volatility smile

Cite this

@article{18be4a9bbe2f41b9a7a257f72da7caf3,
title = "A test of the Asay model for pricing options on the SPI futures contract",
abstract = "The Sydney Futures Exchange is one of the few exchanges world-wide where the options traded on the exchange are subject to futures-style margining. In this paper the valuation equation relating to pure futures options (the Asay model) is reviewed and the pricing performance of the model is examined on transaction prices from the SPI futures option market for the period from 1 June 1993 through to 30 June 1994. The Asay model is shown to generate significant pricing errors. These errors are related to the degree of moneyness and the maturity of the option. The errors are consistent with an observed smile in the implied volatilities.",
keywords = "Asay model, Futures options, G13, Volatility smile",
author = "Brown, {C. A.} and Taylor, {S. D.}",
year = "1997",
month = "1",
day = "1",
doi = "10.1016/S0927-538X(97)00023-1",
language = "English",
volume = "5",
pages = "579--594",
journal = "Pacific Basin Finance Journal",
issn = "0927-538X",
publisher = "Elsevier",
number = "5",

}

A test of the Asay model for pricing options on the SPI futures contract. / Brown, C. A.; Taylor, S. D.

In: Pacific Basin Finance Journal, Vol. 5, No. 5, 01.01.1997, p. 579-594.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - A test of the Asay model for pricing options on the SPI futures contract

AU - Brown, C. A.

AU - Taylor, S. D.

PY - 1997/1/1

Y1 - 1997/1/1

N2 - The Sydney Futures Exchange is one of the few exchanges world-wide where the options traded on the exchange are subject to futures-style margining. In this paper the valuation equation relating to pure futures options (the Asay model) is reviewed and the pricing performance of the model is examined on transaction prices from the SPI futures option market for the period from 1 June 1993 through to 30 June 1994. The Asay model is shown to generate significant pricing errors. These errors are related to the degree of moneyness and the maturity of the option. The errors are consistent with an observed smile in the implied volatilities.

AB - The Sydney Futures Exchange is one of the few exchanges world-wide where the options traded on the exchange are subject to futures-style margining. In this paper the valuation equation relating to pure futures options (the Asay model) is reviewed and the pricing performance of the model is examined on transaction prices from the SPI futures option market for the period from 1 June 1993 through to 30 June 1994. The Asay model is shown to generate significant pricing errors. These errors are related to the degree of moneyness and the maturity of the option. The errors are consistent with an observed smile in the implied volatilities.

KW - Asay model

KW - Futures options

KW - G13

KW - Volatility smile

UR - http://www.scopus.com/inward/record.url?scp=0039468360&partnerID=8YFLogxK

U2 - 10.1016/S0927-538X(97)00023-1

DO - 10.1016/S0927-538X(97)00023-1

M3 - Article

VL - 5

SP - 579

EP - 594

JO - Pacific Basin Finance Journal

JF - Pacific Basin Finance Journal

SN - 0927-538X

IS - 5

ER -