Hybrid intelligent algorithm based option pricing method
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This study investigates the relative rate of price discovery in Chinese Shanghai Stock Exchange (SSE) 50 spot index and SSE 50 ETF options, proposing a put–call parity (PCP) approach to recover the spot prices embedded in the options premiums. The PCP approach offers the benefits of reducing model risk and alleviating the burden of volatility estimation. Empirical results reveal that the contribution of SSE 50 ETF options to price discovery exceeds the contributions of SSE 50 index and SSE 50 ETF. However, ETF contributes larger price discovery than ETF options in the high volatility which is opposite from the leverage hypothesis.
KeywordsSSE 50 index SSE 50 ETF option Price discovery Put–call parity
This research was supported by the Ministry of Education of Humanities and Social Science Project of China (Grant No. 16YJC790010), Social Science Fund of Chongqing, China (Grant No. 2016PY71).
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Conflict of interests
The author declares that there is no conflict of interest regarding the publication of this paper.
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