This paper shows how one can compute option prices from a Bayesian inference viewpoint, using a GARCH model for the dynamics of the volatility of the underlying asset. The proposed evaluation of an option is the predictive expectation of its payoff function. The predictive distribution of this...

This paper explains how the Gibbs sampler can be used to perform Bayesian inference on GARCH models. Although the Gibbs sampler is usually based on the analyti-cal knowledge of the full conditional posterior densities, such knowledge is not available in regression models with GARCH errors. We...