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A COMPARISON OF PRICING KERNELS FOR GARCH OPTION PRICING WITH GENERALIZED HYPERBOLIC DISTRIBUTIONS

BADESCU, ALEXANDRU; ELLIOTT, ROBERT J.; KULPERGER, REG; … - In: International Journal of Theoretical and Applied … 14 (2011) 05, pp. 669-708

Under discrete-time GARCH models markets are incomplete so there is more than one price kernel for valuing contingent …-neutral dynamics of various classes of Generalized Hyperbolic GARCH models arising from different price kernels. We discuss the … neutral GARCH dynamics. Real data examples for pricing European options on the S&P 500 index emphasize the importance of the …

Persistent link: https://www.econbiz.de/10009245356

Option pricing and hedging under a stochastic volatility Lévy process model

Kim, Young; Fabozzi, Frank; Lin, Zuodong; Rachev, Svetlozar - In: Review of Derivatives Research 15 (2012) 1, pp. 81-97

Persistent link: https://www.econbiz.de/10010867545

Option pricing and Esscher transform under regime switching

Elliott, Robert J.; Chan, Leunglung; Siu, Tak Kuen - In: Annals of Finance 1 (2005) 4, pp. 423-432

Persistent link: https://www.econbiz.de/10005808845

Option pricing based on the generalised Tukey distribution

Jiménez, José Alfredo; Arunachalam, Viswanathan; … - In: International Journal of Financial Markets and Derivatives 3 (2014) 3, pp. 191-221

There is good empirical evidence to show that the financial series, whether stocks or indices, currencies or interest rates do not follow the log-normal random walk underlying the Black-Scholes model, which is the basis for most of the theory of options valuation. This article presents a...

Persistent link: https://www.econbiz.de/10010756275

Option Pricing using Realized Volatility

Stentoft, Lars - School of Economics and Management, University of Aarhus - 2008

In the present paper we suggest to model Realized Volatility, an estimate of daily volatility based on high frequency data, as an Inverse Gaussian distributed variable with time varying mean, and we examine the joint properties of Realized Volatility and asset returns. We derive the appropriate...

Persistent link: https://www.econbiz.de/10005440036

Option pricing under truncated Gram–Charlier expansion

Lin, Shin-Hung; Huang, Hung-Hsi; Li, Sheng-Han - In: The North American Journal of Economics and Finance 32 (2015) C, pp. 77-97

, including Black–Scholes (constant variance model), Hull–White (a mean-reverting variance model), GARCH (a time … GARCH models. This result consists with the fact that stock return distributions are usually asymmetric and nonmesokurtic as …

Persistent link: https://www.econbiz.de/10011264491

Option pricing under linear autoregressive dynamics, heteroskedasticity, and conditional leptokurtosis

Hafner, Christian M.; Herwartz, Helmut - Sonderforschungsbereich 373, Quantifikation und … - 1999

Daily returns of financial assets are frequently found to exhibit positive autocorrelation at lag 1. When specifying a linear AR(l) conditional mean, one may ask how this predictability affects option prices. We investigate the dependence of option prices on autoregressive dynamics under...

Persistent link: https://www.econbiz.de/10010956419

Bayesian option pricing using asymmetric GARCH

BAUWENS, LUC; LUBRANO, Michel - Center for Operations Research and Econometrics (CORE), … - 1997

metric. The methods are illustrated using an asymmetric GARCH model with a data set on a stock index in Brussels. The …

Persistent link: https://www.econbiz.de/10005008451

Which Volatility Model for Option Valuation?

Christoffersen, Peter; Jacobs, Kris - Centre Interuniversitaire de Recherche en Analyse des … - 2002

Characterizing asset return dynamics using volatility models is an important part of empirical finance. The existing literature favors some rather complex volatility specifications whose relative performance is usually assessed through their likelihood based on a time-series of asset returns....

Persistent link: https://www.econbiz.de/10005100917

Discrete Time Hedging of OTC Options in a GARCH Environment: A Simulation Experiment

Hagerud, Gustaf E. - Economics Institute for Research (SIR), … - 1997

heteroskedastic environment. This is done by a simulation procedure where asset returns are generated from a GARCH (1,1)-t model. In … shown that the variance of the returns on the hedged position is considerably higher in a GARCH (1,1) environment than in a …

Persistent link: https://www.econbiz.de/10005649363