We examine the pricing performance of the alternative option pricing models using intraday data of KOSPI 200 index options. For the comparison, we consider Black and Scholes (1973)model, simple traders’ rule which is called ad hoc Black-Scholes model, the stochastic volatility model and the stochastic volatility with jumps model. Contrary to the results of Jackwerth and Rubinstein (2001), Li and Pearson (2007), and Kim (2009) using daily data, it is found that the most complicated model, that is, the stochastic volatility with jumps model, shows the best performance followed by the stochastic volatility model for pricing KOSPI 200 index options. As a result, when we consider intraday data, the traders’ rules does not dominate mathematically sophisticated models and the complicated models show better performance
than simple traders’ rule or the Black and Scholes (1973) model.
JEL classification: G13
Keywords: Option Pricing; Volatility Smiles; Black and Scholes; Traders’ rules; Stochastic Volatility; Jumps
