期刊名称：Discussion Papers / Department of Economics, University of Essex
出版年度：2005
卷号：2005
出版社：University of Essex
摘要：Crisis events such as the 1987 stock market crash, the Asian Crisis and the
bursting of the Dot-Com bubble have radically changed the view that extreme
events in financial markets have negligible probability. This paper argues that
the use of the Generalized Extreme Value (GEV) distribution to model the Risk
Neutral Density (RND) function provides a flexible framework that captures the
negative skewness and excess kurtosis of returns, and also delivers the market
implied tail index of asset returns. We obtain an original analytical closed
form solution for the Harrison and Pliska (1981) no arbitrage equilibrium price
for the European option in the case of GEV asset returns. The GEV based option
prices successfully remove the well known pricing bias of the Black-Scholes
model. We explain how the implied tail index is efficacious at identifying the
fat tailed behaviour of losses and hence the left skewness of the price RND
functions, particularly around crisis events.
