Heston, Steven L; Nandi, Saikat - In: Review of Financial Studies 13 (2000) 3, pp. 585-625
This paper develops a closed-form option valuation formula for a spot asset whose variance follows a GARCH(p, q) process that can be correlated with the returns of the spot asset. It provides the first readily computed option formula for a random volatility model that can be estimated and...