Pricing the SPI Futures Call Option Contract Using the Asay Model

Abstract

This paper examines the relative pricing performance of the Asay (1986) futures option pricing model on the All Ordinaries Share Price Index Futures Call Option contract over the period January 1993-September 1995. A dataset of 8092 matched tick-by-tick transactions in SPI future options is examined, and the Asay model is used to generate pricing estimates for the options. This theoretically derived data is then compared against the real price data, and pricing anomalies are observed. Pricing biases are categorised in terms of time to maturity, and examined in terms of unit error and absolute percentage error. Conclusions are drawn as to the relative efficiency of the model with regard to systematic errors.