This method explicitly allows for excess skewness and kurtosis in an expanded Black-Scholes option pricing formula.
The approach adapts a Gram-Charlier series expansions of the standard normal density function to yield an option price formula that is the sum of a Black–Scholes option price plus adjustment terms for nonnormal skewness and kurtosis (Corrado and Su, 1997).
For skewness = 0 and kurtosis = 3, the Corrado-Su option prices are equal to the prices obtained using the Black and Scholes (1973) model.
Corrado, C.J., and Su T. Skewness and kurtosis in S&P 500 Index returns implied by option prices. Financial Research 19:175–92, 1996.
Corrado, C.J., and Su T. Implied volatility skews and stock return skewness and kurtosis implied by stock option prices. European Journal of Finance 3:73–85, 1997.
Hull, J.C., "Options, Futures, and Other Derivatives", Prentice Hall, 5th edition, 2003.
Luenberger, D.G., "Investment Science", Oxford Press, 1998.
Semin Ibisevic (2020). Corrado and Su (1996) European Option Prices (https://www.mathworks.com/matlabcentral/fileexchange/41551-corrado-and-su-1996-european-option-prices), MATLAB Central File Exchange. Retrieved .
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