The DOI matches its Crossref record; 1 of the 1 references it cites were found in a registry or an index.
On Jumps in Common Stock Prices and Their Impact on Call Option Pricing
Abstract
The Black‐Scholes call option pricing model exhibits systematic empirical biases. The Merton call option pricing model, which explicitly admits jumps in the underlying security return process, may potentially eliminate these biases. We provide statistical evidence consistent with the existence of lognormally distributed jumps in a majority of the daily returns of a sample of NYSE listed common stocks. However, we find no operationally significant differences between the Black‐Scholes and Merton model prices of the call options written on the sampled common stocks.
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Citations
Cites
The pricing of options and corporate liabilities
Black, F., & Scholes, M. (1973) · Journal of Political Economy · doi:10.1086/260062 · Cited by 29,074
Cited by
Option values under stochastic volatility: Theory and empirical estimates
Wiggins, J. B. (1987) · Journal of Financial Economics · doi:10.1016/0304-405x(87)90009-2 · Cited by 904
The Crash of ʼ87: Was It Expected? The Evidence from Options Markets
BATES, D. S. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb03775.x · Cited by 874
An Empirical Investigation of Continuous‐Time Equity Return Models
Andersen, T. G., Benzoni, L., & Lund, J. (2002) · The Journal of Finance · doi:10.1111/1540-6261.00460 · Cited by 866
The dynamics of stochastic volatility: evidence from underlying and options markets
Jones, C. S. (2003) · Journal of Econometrics · doi:10.1016/s0304-4076(03)00107-6 · Cited by 503
Pricing in Electricity Markets: A Mean Reverting Jump Diffusion Model with Seasonality
Cartea, Á., & Figueroa, M. G. (2005) · Applied Mathematical Finance · doi:10.1080/13504860500117503 · Cited by 472
Metadata
- Authors
- BALL, C. A., & TOROUS, W. N.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1985-03
- Volume
- 40
- Issue
- 1
- Pages
- 155-173
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2115865827
- Cited by
- 409
- References
- 1
- FWCI
- 14.54
- Type
- journal article
- Language
- en
- Open access
- closed
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- BALL, C. A., & TOROUS, W. N. (1985). On Jumps in Common Stock Prices and Their Impact on Call Option Pricing. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.1985.tb04942.x
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
