| Article ID: | iaor20083912 |
| Country: | Japan |
| Volume: | 50 |
| Issue: | 4 |
| Start Page Number: | 488 |
| End Page Number: | 514 |
| Publication Date: | Dec 2007 |
| Journal: | Journal of the Operations Research Society of Japan |
| Authors: | Miyazaki Koichi |
| Keywords: | financial, risk, stochastic processes |
This article provides an overview of market-based option pricing and its applications. First, two fundamental approaches for market-based option pricing from the literature are introduced. Then, three important new processes, the deterministic volatility model, the stochastic volatility model, and a model including jump, are discussed. Finally, several empirical analyses on the NIKKEI225 option market are provided as examples.