Fitting the variance-gamma model: A goodness-of-fit check for emerging markets

Ahmet Göncü, Mehmet Oğuz Karahan, Tolga Umut Kuzubaş

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)


Variance-Gamma model is widely used for option pricing; however there has been little research on the empirical performance of this model for emerging market economies. In this paper we evaluate the goodness-of-fit of the Variance-Gamma model using index returns data from ten different emerging markets. Based on the Chi-square, Anderson-Darling and Kolmogorov-Smirnov goodness-of-fit test statistics, we show that the Variance-Gamma model fits the dataset well and improves upon the fit of the normal distribution for emerging stock market indices. Furthermore, under the Variance–Gamma model, closed form solutions for pricing European call and put options exist and model parameters can be efficiently estimated via the maximum likelihood method.

Original languageEnglish
Pages (from-to)1-10
Number of pages10
JournalBogazici Journal
Issue number2
Publication statusPublished - 2013


  • Emerging markets
  • Goodness-of-fit
  • Variance-Gamma model


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