Estimating random variance option pricing models: an empirical analysis

S. Pastorello
This paper deals with the estimation of continuous time stochastic volatility models, which have been introduced in finance to price options on stock and other derivative assets. I start by showing that the indirect inference estimators do not suffer from the bias coming from the approximate discretization of the model, this operation being necessary due to the discrete time frequency of observations. Moreover, I suggest to use observed option prices to estimate the parameters of...