Pricing Options Close to Maturity

[raphaelassad]

Hello,
I am doing a project on how to price short dated options. I did some academic research on this subject and I didn't find anything relevant. I am planning to use both statistical and stochastic approaches. All the papers and textbooks I found use the market option prices to calibrate the model parameters. However, I am interested on models that use historical returns as data input instead on the historical options prices.
I wonder if any of you guys have any insights on how to approach this problem. Any suggestions would be appreciated. Thanks

 

[Yike Lu]

Check out the work of Alireza Javaheri.

 

[Keith Tan]

how about binomial/trinomial trees/lattices models?

 

[Giuseppe Trapani]

Hello,
I am doing a project on how to price short dated options. I did some academic research on this subject and I didn't find anything relevant. I am planning to use both statistical and stochastic approaches. All the papers and textbooks I found use the market option prices to calibrate the model parameters. However, I am interested on models that use historical returns as data input instead on the historical options prices.
I wonder if any of you guys have any insights on how to approach this problem. Any suggestions would be appreciated. Thanks

Hi ^^
Can I ask you why you want to resort on historical (hence physical) probabilities for pricing instead of risk-neutral probabilities?
Is it because you have more historical data then quoted/liquid instruments?

Also short dated options are quite sensitive to the presence of jumps in the model. How would you estimate jumps-related parameters?

Thanks in advance ^^