After analyzing the market trading data, we find out that option pricing has the Unspanned Stochastic Volatility character. Therefore, we revised option pricing model based on the USV assumption and use it in the pricing work. We use COMEX Gold’ data to do the empirical analysis; the sample period is from Feb. 17, 2009 to Jul. 12, 2011. Besides, we also use Merton, Bates and Crosby’s option pricing model to do the empirical analysis and then compare the effect and the efficiency of the above four option pricing models. Although the calculating procedure of USV model is much more complicated and time-consuming, the revised option pricing model based on the USV assumption is no better than the Merton, Bates and Crosby’s models. Therefore, the revised option pricing model based on USV assumption needs further improvement, in terms of both pricing effect and efficiency.
Key Words: USV model, Kalman filtering, Quasi-maximum likelihood function
