Improved Maximum Likelihood Estimation of Heston Model and Pricing Efficiency Test: Hong Kong Hang Seng Index Option

<div>Options pricing error of in-the-money call option <svg height="12.5794pt" id="M174" style="vertical-align:-3.29107pt" version="1.1" viewbox="-0.0498162 -9.28833 70.8986 12.5794" width="70.8986pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M300 -147C201 -63 143 98 143 270S200 602 300 686L282 710C136 610 70 450 70 271V270C70 89 136 -72 282 -170L300 -147Z" id="g113-41"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="346" vert-adv-y="346"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,4.498,0)"><path d="M409 504C401 567 396 607 392 642C354 654 312 665 266 665C137 665 60 583 60 487C60 374 161 325 225 290C300 250 355 215 355 141C355 68 311 21 235 21C131 21 86 122 71 183L41 176C48 128 61 42 68 21C78 16 93 8 118 0C142 -7 175 -15 216 -15C349 -15 438 69 438 174C438 287 344 333 265 374C186 414 138 449 138 522C138 576 172 631 249 631C336 631 363 562 380 499L409 504Z" id="g121-81"></path><glyph.data ascent="989" descent="-360" horiz-adv-x="474" vert-adv-y="474"></glyph.data></g><g transform="matrix(.0091,0,0,-0.0091,10.66,3.132)"><path d="M329 433H203L239 587L230 596L147 534L123 433H57L30 395L34 388H115L61 129C37 16 59 -12 85 -12C147 -12 222 58 260 98L241 125C212 95 160 62 144 62C132 62 127 71 138 126L192 386L305 394L329 433Z" id="g50-117"></path><glyph.data ascent="3443" descent="-2856" horiz-adv-x="347" vert-adv-y="347"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,14.328,0)"><path d="M368 703H309L44 -163H104L368 703Z" id="g113-48"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="412" vert-adv-y="412"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,19.689,0)"><path d="M743 650H503L496 622L527 618C563 613 564 603 532 573C449 495 371 431 323 392C301 374 272 355 246 346L280 522C297 609 300 614 379 622L385 650H135L129 622C209 614 215 609 198 522L124 133C106 39 99 35 23 28L17 0H271L277 28C193 35 192 39 208 133L239 316C264 328 280 325 303 288C368 183 435 90 502 0H652L659 28C602 34 584 43 543 94C495 154 403 283 347 369L574 554C634 603 659 612 735 624L743 650Z" id="g113-76"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="755" vert-adv-y="755"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,29.506,0)"><path d="M275 270C275 450 212 609 64 710L45 686C145 604 203 442 203 270S147 -63 45 -147L64 -170C213 -68 275 89 275 270Z" id="g113-42"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="346" vert-adv-y="346"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,37.636,0)"><path d="M535 323V373H52V323H535ZM535 138V188H52V138H535Z" id="g117-34"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="587" vert-adv-y="587"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,48.899,0)"><path d="M241 635C89 635 35 457 35 312C35 153 89 -12 240 -12C390 -12 443 166 443 312C443 466 390 635 241 635ZM238 602C329 602 354 454 354 312C354 172 330 22 240 22C152 22 124 173 124 313S148 602 238 602Z" id="g113-49"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="480" vert-adv-y="480"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,55.139,0)"><path d="M113 -12C146 -12 170 11 170 46C170 78 146 103 114 103S58 78 58 46C58 11 82 -12 113 -12Z" id="g113-47"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="228" vert-adv-y="228"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,58.103,0)"><path d="M244 635C114 635 38 519 38 422C38 317 111 240 217 240C236 240 255 244 277 256L345 292C311 140 203 39 59 15L64 -15C89 -15 150 -5 204 17C339 72 440 202 440 386C440 521 368 635 244 635ZM228 602C326 602 352 479 352 390C352 370 351 347 348 324C327 308 293 296 258 296C174 296 124 369 124 458C124 517 152 602 228 602Z" id="g113-58"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="480" vert-adv-y="480"></glyph.data></g><g transform="matrix(.013,0,0,-0.013,64.344,0)"><path d="M412 140C382 77 369 73 315 73H129L270 222C362 320 402 379 402 466C402 571 322 635 234 635C177 635 130 609 99 576L42 495L64 475C90 514 133 568 201 568C274 568 318 519 318 435C318 349 255 267 193 193C144 135 87 78 32 23V0H405C417 45 427 89 440 131L412 140Z" id="g113-51"></path><glyph.data ascent="3473" descent="-2876" horiz-adv-x="480" vert-adv-y="480"></glyph.data></g></svg> price.</div>

Mathematical Problems in Engineering

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Figure 3: Improved Maximum Likelihood Estimation of Heston Model and Pricing Efficiency Test: Hong Kong Hang Seng Index Option 