Invited Speaker
Dr. Omid M. Ardakani, Associate Professor
Parker College of Business, Georgia Southern University, USASpeech Title: Options Valuation in a High-frequency World
Abstract: An alternative approach to the Black-Scholes-Merton formulation of option valuation is the entropy pricing theory. Entropy pricing applies notions of information theory to derive the theoretical value of options. I elaborate further on the maximum entropy formulation of option pricing using a generalized set of moment constraints. Higher order moments contain more information about the price density and characterize the shape of the underlying distribution. In a Monte Carlo study, I present entropies of heavy-tailed distributions and show that entropic call densities vary with constraints and become closer to each other as the order of moments increases. In an empirical analysis using high-frequency S&P 500 index options, I examine the impact of moment constraints on the accuracy of theoretical values. Simulation and empirical evidence suggest that the entropic pricing framework provides more accurate results for heavy-tailed, high-frequency data when higher order moment constraints are imposed.
Biography: Omid M. Ardakani, Associate Professor of Economics, is the Shirley and Philip Solomons, Sr. Research Fellow in the Department of Economics, Parker College of Business at Georgia Southern University. He received his Ph.D. in economics from the University of Wisconsin-Milwaukee in 2015. Ardakani’s research has been published in leading journals, such as Journal of Economic Dynamics and Control, International Statistical Review, and Studies in Nonlinear Dynamics and Econometrics. Currently, he is the coeditor of Open Economics. His professional activities include serving as the editorial board member of International Finance and Banking and the founding director of Georgia Southern’s Statistics and Econometrics Research Group (SERG).