Option pricing with overnight and intraday volatility
开发了一个灵活的新期权定价模型，分别刻画隔夜和日内收益的波动率，利用S&P 500指数期权数据验证，相比传统模型定价精度提升7.24%，在高波动时期改进更显著。
Abstract Efficiently exploiting the volatility information contained in price variations is important for pricing options and other derivatives. In this study, we develop a new and flexible option‐pricing model that explicitly specifies the joint dynamics of overnight and intraday returns. The application of multivariate Edgeworth–Sargan density enables us to derive analytical approximations for option valuation formulas. Empirically, the model improves significantly upon benchmark models using S&P 500 index options. In particular, its separate modeling of intraday and overnight return volatility leads to an out‐of‐sample gain of 7.24% in pricing accuracy compared with the modeling of the close‐to‐close return volatility as a whole. The improvements are more pronounced during highly volatile periods.