Is There an Informationally Passive Benchmark for Option

†We would like to thank Gurdip Bakshi, Nikunj Kapadia and Robert Tompkins for kindly sharing their data sets. We also thank seminar participants at Stanford University and Columbia University, and Steve Figlewski for comments on a previous version of this paper titled “Extending Figlewski’s option pricing formula”. The first author acknowledges partial support from the NSF via grant DMI 0447990. The second author is supported by an Advanced Fellowship from the EPSRC. The third author acknowledges partial financial support from DAAD, EPSRC and KWI. ‡Bendheim Center for Finance and ORFE, Princeton University, Princeton, NJ, 08544. USA. Email: [email protected] §Department of Mathematics, University of Bath, Bath. BA2 7AY. UK. Email: [email protected] ¶Statistical Laboratory, Centre for Mathematical Sciences, Wilberforce Rd, Cambridge, CB3 0WB. UK. Email: [email protected]