The Performance of Skewness and Kurtosis Adjusted Option Pricing Model in Emerging Markets

Abstract

In this study, the option pricing performance of the adjusted Black-Sholes model, which is proposed by of Corrado and Su (1996) and corrected by Brown and Robinson (2002), is investigtaed and compared with original Black Sholes prining model for the Turkish derivatives market. The data contain the European options written on ISE 30 index extends from January 02, 2015 to April 24, 2015 for given exercise prices with maturity April 30, 2015. In this period, the strike prices are ranging from 86 to 124. To compare the models, the implied parameters are derived by minimizing the sum of squared deviations between the observed and theoretical option prices. The implied distribution of ISE 30 doesnot significantly deviate from normal distribution. In adittion, pricing performance of Black Sholes model performs better in most of the time.