The black-Scholes option pricing model was derived without considering jump risk. The empirical test result of jump components in the American stock market, It has found that the actual underlying stock return contains discontinuous sample paths.
The Korean market portfolio contains jump components. Even if holidays are deleted in the data set and dividends are considered, jump risks are statistically significant. And even if the dividends, issuing new equities are considered, individual stocks have jump components and their jump amplitudes are lager than the market portfolio.
The frequency of the jump and the likelihood ratio test statistics in for the Korean Market index are lager than the American market index.
