We examine the fitness of the option pricing model based on the hyperbolic distribution for Korea Composite Stock Price Index(KOSPI) 200 index. We use Esscher transform to drive the pricing formula for European call option on KOSPI 200. We compute the hyperbolic options prices, and compare the results with the prices given by the Black-Scholes model. We present many empirical results in favor of using the hyperbolic model, and conclude that the hyperbolic pricing model fits the market better than the Black-Scholes formula.
Keywords: Option price, Black-Scholes model, Hyperbolic model, Esscher transform.
