Review of Quantitative Finance and Accounting

, Volume 24, Issue 2, pp 115–134

A Non-Parametric Option Pricing Model: Theory and Empirical Evidence


    • Rutgers Business SchoolRutgers University
  • Oded Palmon
    • Rutgers Business SchoolRutgers University

DOI: 10.1007/s11156-005-6333-2

Cite this article as:
Chen, R. & Palmon, O. Rev Quant Finan Acc (2005) 24: 115. doi:10.1007/s11156-005-6333-2


In this paper, we propose an empirically-based, non-parametric option pricing model to evaluate S&P 500 index options. Given the fact that the model is derived under the real measure, an equilibrium asset pricing model, instead of no-arbitrage, must be assumed. Using the histogram of past S&P 500 index returns, we find that most of the volatility smile documented in the literature disappears.

Key words

optionsimplied volatilityvolatility smilenonparametric model

Copyright information

© Springer Science + Business Media, Inc. 2005