Timeline for Is there any other way to measure option pricing model performance than proximity to market prices?
Current License: CC BY-SA 3.0
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| May 27, 2014 at 19:04 | comment | added | berkorbay | All you wrote above is right but it misses the point (good catch on the OTC but there are less painful ways to do that if we are assuming market is optimal, but let's restrict ourselves with exchange traded markets). I think I should clarify that it is an academic way of model validation. They simply say "My model represents the market option prices better (than the benchmark models) so it is a better option pricing model." I say "if you assume market is optimal, then your model will never be useful since there will always be a market price when you trade on the market." | |
| May 27, 2014 at 14:42 | history | edited | pincopallino | CC BY-SA 3.0 |
added 84 characters in body
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| May 27, 2014 at 14:35 | history | answered | pincopallino | CC BY-SA 3.0 |