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Mark Schroder (1989)
Computing the Constant Elasticity of Variance Option Pricing FormulaJournal of Finance, 44
David Emanuel, James MacBeth (1982)
Further Results on the Constant Elasticity of Variance Call Option Pricing ModelJournal of Financial and Quantitative Analysis, 17
James MacBeth, L. Merville (1980)
Tests of the Black-Scholes and Cox Call Option Valuation ModelsJournal of Finance, 35
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Valuing Derivative Securities Using the Explicit Finite Difference MethodJournal of Financial and Quantitative Analysis, 25
James MacBeth, L. Merville (1979)
An Empirical Examination of the Black‐Scholes Call Option Pricing ModelJournal of Finance, 34
Daniel Nelson, K. Ramaswamy (1990)
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G. Bakshi, C. Cao, Zhiwu Chen (1997)
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F. Black, Myron Scholes (1973)
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S. Swidler, J. Diltz (1992)
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The seminal work by Cox (1975, 1996), MacBeth and Merville (1979, 1980)and Emanuel and Macbeth (1982) show that, both theoretically and empirically,the constant elasticity of variance option model (CEV) is superior to theBlack–Scholes model in explaining market prices. In this paper, weextend the MacBeth and Merville (1979, 1980) research by using a Europeancontract (S&P 500 index options). We find supportive evidence to theMacBeth and Merville results although our sample is not subject to Americanpremium biases. Furthermore, we reduce the approximation errors by using thenon-central chi-square probability functions proposed by Shroder (1989).
Review of Pacific Basin Financial Markets and Policies – World Scientific Publishing Company
Published: Jun 1, 2004
Keywords: Constant elasticity of variance option model Black–Scholes model S&P 500 index non-central chi-square probability functions
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