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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
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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
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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
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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
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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
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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
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Bayesian inference on GARCH models using the Gibbs sampler
BAUWENS, LUC; LUBRANO, MICHEL - In: Econometrics Journal 1 (1998) ConferenceIssue, pp. 23-23
This paper explains how the Gibbs sampler can be used to perform Bayesian inference on GARCH models. Although the Gibbs … available in regression models with GARCH errors. We show that the Gibbs sampler can be combined with a unidimensional … compared with importance sampling and the Metropolis-Hastings algorithm. It is applied to estimate an asymmetric Student-GARCH …
Persistent link: https://www.econbiz.de/10005243404
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Pricing of options under different volatility models
Herzberg, Markus; Sibbertsen, Philipp - Institut für Wirtschafts- und Sozialstatistik, … - 2004
In this paper we compare the price of an option with one year maturity of the German stock index DAX for several volatility models including long memory and leverage effects. We compute the price by applying a present value scheme as well as the Black-Scholes and Hull-White formulas which...
Persistent link: https://www.econbiz.de/10009219819
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Discrete time option pricing with flexible volatility estimation
Hafner, Christian M.; HÄrdle, Wolfgang - In: Finance and Stochastics 4 (2000) 2, pp. 189-207
By extending the GARCH option pricing model of Duan (1995) to more flexible volatility estimation it is shown that the … properties of the stationary pricing distribution in the case of a threshold GARCH model. For a stock index series with a … pronounced leverage effect, simulated threshold GARCH option prices are substantially closer to observed market prices than the …
Persistent link: https://www.econbiz.de/10005759645
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Loss Functions in Option Valuation: A Framework for Model Selection
Bams, Dennis; Lehnert, Thorsten; Wolff, Christian C - C.E.P.R. Discussion Papers - 2005
In this paper, we investigate the importance of different loss functions when estimating and evaluating option pricing models. Our analysis shows that it is important to take into account parameter uncertainty, since this leads to uncertainty in the predicted option price. We illustrate the...
Persistent link: https://www.econbiz.de/10005791774