Upside and downside correlated jump risk premia of currency options and expected returns

He, Jie-Cao; Chang, Hsing-Hua; Chen, Ting-Fu; Lin, Shih-Kuei

doi:10.1186/s40854-023-00493-3

Financial Innovation

Table 7 Pricing performance of JPY/USD options

From: Upside and downside correlated jump risk premia of currency options and expected returns

	In-sample					Out-of-sample
	1-Month	3-Month	6-Month	12-Month	Average	1-Month	3-Month	6-Month	12-Month	Average
10-delta
GK	0.000669	0.000723	0.000759	0.000743	0.000724	0.000995	0.000855	0.000818	0.000763	0.000858
CB	0.001250	0.001200	0.001755	0.001384	0.001397	0.001434	0.001246	0.001781	0.001369	0.001457
CB–ISJ	0.000227	0.002385	0.000337	0.002112	0.001265	0.000432	0.002578	0.000369	0.002043	0.001355
CB–CSJ	0.000534	0.009267	0.000263	0.005966	0.004008	0.000707	0.009782	0.000324	0.005458	0.004068
CB–CAJ	0.000427	0.009372	0.000265	0.005825	0.003972	0.000577	0.009875	0.000332	0.005338	0.004030
25-delta
GK	0.000669	0.000716	0.000736	0.000711	0.000708	0.001021	0.000855	0.000795	0.000733	0.000851
CB	0.001240	0.001151	0.001750	0.001420	0.001390	0.001450	0.001211	0.001772	0.001411	0.001461
CB–ISJ	0.000205	0.002349	0.000321	0.002210	0.001271	0.000437	0.002548	0.000358	0.002139	0.001370
CB–CSJ	0.000536	0.009268	0.000262	0.006045	0.004028	0.000742	0.009787	0.000331	0.005553	0.004103
CB–CAJ	0.000433	0.009370	0.000262	0.005894	0.003990	0.000611	0.009888	0.000333	0.005416	0.004062
50-delta
GK	0.000564	0.000524	0.000482	0.000434	0.000501	0.000972	0.000702	0.000560	0.000475	0.000677
CB	0.001062	0.000874	0.001286	0.000910	0.001033	0.001303	0.000962	0.001336	0.000929	0.001133
CB–ISJ	0.000140	0.002194	0.000188	0.002150	0.001168	0.000423	0.002407	0.000250	0.002086	0.001291
CB–CSJ	0.000533	0.009125	0.000146	0.005922	0.003931	0.000810	0.009637	0.000244	0.005469	0.004040
CB–CAJ	0.000444	0.009230	0.000138	0.005766	0.003894	0.000684	0.009757	0.000241	0.005320	0.004001
75-delta
GK	0.000504	0.000396	0.000331	0.000329	0.000390	0.000980	0.000625	0.000434	0.000392	0.000608
CB	0.000907	0.000674	0.000840	0.000419	0.000710	0.001183	0.000789	0.000920	0.000474	0.000842
CB–ISJ	0.000179	0.002123	0.000199	0.002153	0.001163	0.000522	0.002352	0.000289	0.002103	0.001317
CB–CSJ	0.000652	0.009038	0.000174	0.005857	0.003930	0.001017	0.009543	0.000305	0.005443	0.004077
CB–CAJ	0.000581	0.009144	0.000149	0.005719	0.003898	0.000899	0.009687	0.000289	0.005308	0.004046
90-delta
GK	0.000786	0.000780	0.000885	0.001239	0.000923	0.001332	0.001078	0.001027	0.001338	0.001194
CB	0.001067	0.000966	0.000924	0.000681	0.000910	0.001365	0.001107	0.001042	0.000790	0.001076
CB–ISJ	0.000552	0.002510	0.000802	0.002852	0.001679	0.000957	0.002755	0.000930	0.002825	0.001867
CB–CSJ	0.001123	0.009391	0.000792	0.006461	0.004442	0.001595	0.009886	0.000966	0.006097	0.004636
CB–CAJ	0.001074	0.009515	0.000743	0.006345	0.004419	0.001488	0.010075	0.000936	0.005978	0.004619

This table lists the MSEs of different maturity, delta levels, and models with in-sample and out-of-sample results for the currency pair JPY/USD. The left panel shows the in-sample test results and the right panel shows the out-of-sample test results. The bold text shows the results of the best-performing model among the five models with the same maturity and delta level

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