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Option Pricing Under Non-Normality: A Comparative Analysis.

Mozumder, S.; Sorwar, G.; Dowd, K.


S. Mozumder

G. Sorwar


This paper carries out a comparative analysis of the calibration and performance of a variety of options pricing models. These include Black and Scholes (J Polit Econ 81:637–659, 1973), the Gram–Charlier (GC) approach of Backus et al. (1997), the stochastic volatility (HS) model of Heston (Rev Financ Stud 6:327–343, 1993), the closed-form GARCH process of Heston and Nandi (Rev Financ Stud 13:585–625, 2000) and a variety of Lévy processes including the Variance Gamma (VG), Normal Inverse Gaussian (NIG), and, CGMY and Kou (Manag Sci 48:1086–1101, 2002) jump-diffusion models. Unlike most studies of option pricing, we compare these models using a common point-in-time data which reflects the perspective of a new investor who wishes to choose between models using only the most minimal recent data set. For each of these models, we also examine the accuracy of delta and delta-gamma approximations to the valuation of both individual options and an illustrative option portfolio.


Mozumder, S., Sorwar, G., & Dowd, K. (2013). Option Pricing Under Non-Normality: A Comparative Analysis. Review of Quantitative Finance and Accounting, 40(2), 273-292.

Journal Article Type Article
Online Publication Date Feb 12, 2013
Publication Date 2013-02
Deposit Date Nov 20, 2012
Journal Review of Quantitative Finance and Accounting
Print ISSN 0924-865X
Electronic ISSN 1573-7179
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 40
Issue 2
Pages 273-292
Public URL