Validating Bates Stochastic Volatility Jump Option Pricing

Summary

The document describes a search for benchmark parameters and European call prices to validate an implementation of the Bates stochastic volatility and jump model. The accepted response points to research by Gilli and Schumann as a source of parameter estimates, an estimation-improvement approach that calibrates estimates with a heuristic method, and MATLAB code for replication.

The cited work also compares the Bates model with two other models, including Heston, and discusses its findings. The response says the paper does not supply the corresponding call-price time series, but suggests those prices may be computable from its code. This makes the reference useful for reproducing model estimates and comparative analysis, while leaving an independent set of published prices unavailable in the discussion.

Key ideas

• A published study provides parameter estimates for the Bates option-pricing model.
• The study describes refining estimates through heuristic calibration and includes MATLAB implementation material.
• Its analysis compares Bates with other models, including Heston.
• The discussion does not provide a ready-made time series of call prices for validation.

Tags

# Validation of Bates SVJ model


# Validation of Bates SVJ model












I have just finished implementing the Bates model for pricing European call options.

To check results, I have been looking for a validation set where I could see the Bates parameter values and their associated call prices. However, I have not been able to obtain this information online.

Could anyone point me to any paper or reference where parameter values and call prices for the Bates model are given?

## Answer by Quantopik (score 1, accepted)

https://quant.stackexchange.com/a/17548

Look at Gilli & Schumann's paper.

They provide a Bates' model estimates set, the way to improve such estimates calibrating those ones using an Heuristic model and, lastly, the relative codes in matlab, in order to be able to replicate the model.

Unfortunately, there are not available the relative call prices estimated time series; I think that noone will post it for free. Anyway, although I did not try personally, I think you can compute those by using their codes too.

The same methodology is used for the Heston's model.

In the end, by commenting the result they got, they compared all three models analyzed and provided a conclusion about the analysis.

Hope this may help you.

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