The first four conditional moments of the integrated variance implied by the GARCH diffusion process are derived analytically. Based on these moments and on a power series method an analytical approximation formula to price European options under the GARCH diffusion model is obtained. Monte...

We derive analytically the first four conditional moments of the integrated variance implied by the GARCH diffusion process. From these moments we obtain an analytical closed-form approximation formula to price European options under the GARCH diffusion model.Using Monte Carlo simulations, we...