We implement two models which analyze the vertical spreads in the KOSPI200 index options, and evaluate their performances in terms of the estimation error. The first model, which is called, "theoretical model" is inferred from the Black and Scholes` option-pricing model. The second is called "econometric model", which is the regression model fitted to the market daily data. It is the ARMA(1,1) model, whose explanatory parameters consist of the sensitivity parameters of the option. These two models empirically proved to catch the market disequilibrium states and could be used for investment purposes.
The comparative analysis of the above models says that the econometric model has smaller estimation error than the others. The mean estimation error of the model is just 6.73% of the average of the market spreads, while the theoretical model has 10.73% of it.
