INFERENCE FOR OPTION PANELS IN PURE-JUMP SETTINGS

原文摘要

We develop parametric inference procedures for large panels of noisy option data in a setting, where the underlying process is of pure-jump type, i.e., evolves only through a sequence of jumps. The panel consists of options written on the underlying asset with a (different) set of strikes and maturities available across the observation times. We consider an asymptotic setting in which the cross-sectional dimension of the panel increases to infinity, while the time span remains fixed. The information set is augmented with high-frequency data on the underlying asset. Given a parametric specification for the risk-neutral asset return dynamics, the option prices are nonlinear functions of a time-invariant parameter vector and a time-varying latent state vector (or factors). Furthermore, no-arbitrage restrictions impose a direct link between some of the quantities that may be identified from the return and option data. These include the so-called jump activity index as well as the time-varying jump intensity. We propose penalized least squares estimation in which we minimize the L 2 distance between observed and model-implied options. In addition, we penalize for the deviation of the model-implied quantities from their model-free counterparts, obtained from the high-frequency returns. We derive the joint asymptotic distribution of the parameters, factor realizations and high-frequency measures, which is mixed Gaussian. The different components of the parameter and state vector exhibit different rates of convergence, depending on the relative (asymptotic) informativeness of the high-frequency return data and the option panel.

摘要来源：Crossref