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Heston Nandi Option Pricing Model Applied to the CIVETS Indices

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Advances in Cross-Section Data Methods in Applied Economic Research (ICOAE 2019)

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Abstract

The purpose of this study is to make use of the Heston Nandi model to approximate option price surfaces for the CIVETS (Colombia, Indonesia, Vietnam, Egypt and South Africa) countries’ equity indices. Daily data from 2010 to 2018 was used. The statistical properties of the return series show signs of leptokurtosis and volatility clustering, which is consistent with the stylised facts of financial returns. The approximated call option price surface is consistent with what is found in the market. The approximated option prices for Egypt and Turkey are slightly higher due to greater historical volatility, and a higher risk-free rate.

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Author information

Authors and Affiliations

  1. Department of Finance and Investment Management, University of Johannesburg, Auckland Park, Johannesburg, 2006, South Africa

    Niel Oberholzer & Pierre J. Venter

Authors
  1. Niel Oberholzer
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  2. Pierre J. Venter
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Corresponding author

Correspondence to Pierre J. Venter .

Editor information

Editors and Affiliations

  1. Department of Economics, University of Western Macedonia, Kastoria, Greece

    Nicholas Tsounis

  2. Department of Economics, University of Western Macedonia, Kastoria, Greece

    Aspasia Vlachvei

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Oberholzer, N., Venter, P.J. (2020). Heston Nandi Option Pricing Model Applied to the CIVETS Indices. In: Tsounis, N., Vlachvei, A. (eds) Advances in Cross-Section Data Methods in Applied Economic Research. ICOAE 2019. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-38253-7_38

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