Comparison Of Option Pricing Between Arma Garch And Garch M Models

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Comparison of Option Pricing Between ARMA-GARCH AND GARCH-M MODELS

Author : Yi Xi
Publisher :
ISBN 13 :
Total Pages : 136 pages
Book Rating : 4.:/5 (17 download)

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Book Synopsis Comparison of Option Pricing Between ARMA-GARCH AND GARCH-M MODELS by : Yi Xi

Download or read book Comparison of Option Pricing Between ARMA-GARCH AND GARCH-M MODELS written by Yi Xi and published by . This book was released on 2013 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt: Option pricing is a major area in financial modeling. Option pricing is sometimes based on normal GARCH models. Normal GARCH models fail to capture the skewness and the leptokurtosis in financial data. The variant GARCH-in-mean (GARCH-M) model is widely used in the option pricing literature. It adds a heteroskedasticity term to the mwhich is interpreted as a risk premium, and also incorporates a type of asymmetry. Our goal is to compare option valuation between GARCH-M and ARMA-GARCH models with normal and non-normal, z-distributed innovations. The models are fitted to the historical return data, and risk neutral measures are based on the conditional Esscher transform and the extended Girsanov principle. We compare European Calls on the S & P 500 with the mopredictions. The TGARCH is best for ARMA-GARCH/GARCH-M models. Neither normal nor z dominates the other, but overall z-TGARCH-M (z-innovations) seems to be best, ARMA- TGARCH is surprisingly good.

A Comparison of GARCH Option Pricing Models

Author : Arvid Voormanns
Publisher :
ISBN 13 : 9783659963230
Total Pages : 80 pages
Book Rating : 4.9/5 (632 download)

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Book Synopsis A Comparison of GARCH Option Pricing Models by : Arvid Voormanns

Download or read book A Comparison of GARCH Option Pricing Models written by Arvid Voormanns and published by . This book was released on 2016-10-27 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:

American Option Pricing Using GARCH Models and the Normal Inverse Gaussian Distribution

Author : Lars Stentoft
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis American Option Pricing Using GARCH Models and the Normal Inverse Gaussian Distribution by : Lars Stentoft

Download or read book American Option Pricing Using GARCH Models and the Normal Inverse Gaussian Distribution written by Lars Stentoft and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we propose a feasible way to price American options in a model with time-varying volatility and conditional skewness and leptokurtosis, using GARCH processes and the Normal Inverse Gaussian distribution. We show how the risk-neutral dynamics can be obtained in this model, we interpret the effect of the risk-neutralization, and we derive approximation procedures which allow for a computationally efficient implementation of the model. When the model is estimated on financial returns data the results indicate that compared to the Gaussian case the extension is important. A study of the model properties shows that there are important option pricing differences compared to the Gaussian case as well as to the symmetric special case. A large scale empirical examination shows that our model out-performs the Gaussian case for pricing options on the three large US stocks as well as a major index. In particular, improvements are found when it comes to explaining the smile in implied standard deviations.

Volatility and Time Series Econometrics

Author : Mark Watson
Publisher : Oxford University Press
ISBN 13 : 0199549494
Total Pages : 432 pages
Book Rating : 4.1/5 (995 download)

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Book Synopsis Volatility and Time Series Econometrics by : Mark Watson

Download or read book Volatility and Time Series Econometrics written by Mark Watson and published by Oxford University Press. This book was released on 2010-02-11 with total page 432 pages. Available in PDF, EPUB and Kindle. Book excerpt: A volume that celebrates and develops the work of Nobel Laureate Robert Engle, it includes original contributions from some of the world's leading econometricians that further Engle's work in time series economics

A Closed-form GARCH Option Pricing Model

Author : Steven L. Heston
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.0/5 ( download)

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Book Synopsis A Closed-form GARCH Option Pricing Model by : Steven L. Heston

Download or read book A Closed-form GARCH Option Pricing Model written by Steven L. Heston and published by . This book was released on 1997 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Application of ARMA and GARCH models to the daily gold and silver exchange prices in US dollar

Author : Van Anh Hoang
Publisher : GRIN Verlag
ISBN 13 : 3668201668
Total Pages : 39 pages
Book Rating : 4.6/5 (682 download)

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Book Synopsis Application of ARMA and GARCH models to the daily gold and silver exchange prices in US dollar by : Van Anh Hoang

Download or read book Application of ARMA and GARCH models to the daily gold and silver exchange prices in US dollar written by Van Anh Hoang and published by GRIN Verlag. This book was released on 2016-04-21 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2016 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,7, European University Viadrina Frankfurt (Oder) (Lehrstuhl Statistik), course: WS 2015/2016, language: English, abstract: This paper deals with the development of the gold and silver prices from January 2001 until January 2015 and introduces the ARMA-model from Box & Jenkins for (weakly) stationary stochastic processes and the GARCH-model from Bollerslev to model heteroscedastic time series. The results, which were obtained with the help of the statistics package R, are presented in section 5 and 6 respectively. Besides, a forecast of the prices for both assets is made in section 7, the limitations of the research are presented in section 8 and section 9 concludes with a summary of the findings. It is widely known in the financial world that both equities, silver and gold have a long history of serving as a hedge against inflation, political risk and currency exchange risk, which provide economic and physical safety for the investors during times of political and economic crises as well as equity market crashes. This phenomenon could be observed in the 2008 financial crisis, where other mineral prices fell, but only the gold price increased by 6%. Moreover, researchers also show that gold and dollar seem to be negatively related, as in times, when the dollar was weak the price for gold increases. Hence, gold was found to be uncorrelated with other types of assets, which leads to advantages for an investor in an era of globalization. As gold and silver assets seem to play an important role for investors, it is of great necessity to monitor its prices and the volatility of the time series. The autoregressive moving average models (ARMA) and the generalized autoregressive heteroscedasticity (GARCH) models became popular for academics and practitioners and led to a fundamental change to the approach of examining financial data. The ARMA models have been further extended and an efficient modelling of the volatility of the prices with GARCH models was further inspected by many researchers.

Option Pricing Using GARCH Models [microform] : an Empirical Examination

Author : Sasseville, Caroline
Publisher : Montréal : Service des archives, Université de Montréal, Section Microfilm
ISBN 13 :
Total Pages : 166 pages
Book Rating : 4.:/5 (55 download)

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Book Synopsis Option Pricing Using GARCH Models [microform] : an Empirical Examination by : Sasseville, Caroline

Download or read book Option Pricing Using GARCH Models [microform] : an Empirical Examination written by Sasseville, Caroline and published by Montréal : Service des archives, Université de Montréal, Section Microfilm. This book was released on 2002 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Garch Option Pricing Model

Author : Mateo Antonac
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (139 download)

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Book Synopsis Garch Option Pricing Model by : Mateo Antonac

Download or read book Garch Option Pricing Model written by Mateo Antonac and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Complex Systems in Finance and Econometrics

Author : Robert A. Meyers
Publisher : Springer Science & Business Media
ISBN 13 : 1441977007
Total Pages : 919 pages
Book Rating : 4.4/5 (419 download)

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Book Synopsis Complex Systems in Finance and Econometrics by : Robert A. Meyers

Download or read book Complex Systems in Finance and Econometrics written by Robert A. Meyers and published by Springer Science & Business Media. This book was released on 2010-11-03 with total page 919 pages. Available in PDF, EPUB and Kindle. Book excerpt: Finance, Econometrics and System Dynamics presents an overview of the concepts and tools for analyzing complex systems in a wide range of fields. The text integrates complexity with deterministic equations and concepts from real world examples, and appeals to a broad audience.

A Closed-Form GARCH Option Pricing Model

Author : Steven L. Heston
Publisher :
ISBN 13 :
Total Pages : 34 pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis A Closed-Form GARCH Option Pricing Model by : Steven L. Heston

Download or read book A Closed-Form GARCH Option Pricing Model written by Steven L. Heston and published by . This book was released on 2014 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a closed-form option pricing formula for a spot asset whose variance follows a GARCH process. The model allows for correlation between returns of the spot asset and variance and also admits multiple lags in the dynamics of the GARCH process. The single factor (one lag) version of this model contains Heston's (1993) stochastic volatility model as a diffusion limit and therefore unifies the discrete GARCH and continuous-time stochastic volatility literature of option pricing. The new model provides the first option formula for a random volatility model that is solely a function of observables; all the parameters can be easily estimated from the history of asset prices, observed at discreteintervals. Empirical analysis on Samp;P500 index options shows the single factor version of the GARCH model to be a substantial improvement over the Black-Scholes (1973) model. The GARCH model continues to substantially outperform the Black-Scholes model even when the Black-Scholes model is updated every period while the parameters of the GARCH model are held constant. The improvement is due largely to the ability of the GARCH model to describe the correlation of volatility with spot returns. This allows the GARCH model to capture strike price biases in the Black-Scholes model that give rise to the skew in implied volatilities in the index options market.

GARCH Models

Author : Christian Francq
Publisher : John Wiley & Sons
ISBN 13 : 1119313570
Total Pages : 517 pages
Book Rating : 4.1/5 (193 download)

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Book Synopsis GARCH Models by : Christian Francq

Download or read book GARCH Models written by Christian Francq and published by John Wiley & Sons. This book was released on 2019-06-10 with total page 517 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides a comprehensive and updated study of GARCH models and their applications in finance, covering new developments in the discipline This book provides a comprehensive and systematic approach to understanding GARCH time series models and their applications whilst presenting the most advanced results concerning the theory and practical aspects of GARCH. The probability structure of standard GARCH models is studied in detail as well as statistical inference such as identification, estimation, and tests. The book also provides new coverage of several extensions such as multivariate models, looks at financial applications, and explores the very validation of the models used. GARCH Models: Structure, Statistical Inference and Financial Applications, 2nd Edition features a new chapter on Parameter-Driven Volatility Models, which covers Stochastic Volatility Models and Markov Switching Volatility Models. A second new chapter titled Alternative Models for the Conditional Variance contains a section on Stochastic Recurrence Equations and additional material on EGARCH, Log-GARCH, GAS, MIDAS, and intraday volatility models, among others. The book is also updated with a more complete discussion of multivariate GARCH; a new section on Cholesky GARCH; a larger emphasis on the inference of multivariate GARCH models; a new set of corrected problems available online; and an up-to-date list of references. Features up-to-date coverage of the current research in the probability, statistics, and econometric theory of GARCH models Covers significant developments in the field, especially in multivariate models Contains completely renewed chapters with new topics and results Handles both theoretical and applied aspects Applies to researchers in different fields (time series, econometrics, finance) Includes numerous illustrations and applications to real financial series Presents a large collection of exercises with corrections Supplemented by a supporting website featuring R codes, Fortran programs, data sets and Problems with corrections GARCH Models, 2nd Edition is an authoritative, state-of-the-art reference that is ideal for graduate students, researchers, and practitioners in business and finance seeking to broaden their skills of understanding of econometric time series models.

Option Valuation Formula for General Garch-in-Mean Models

Author : Zhongmin Qian
Publisher :
ISBN 13 :
Total Pages : 26 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Option Valuation Formula for General Garch-in-Mean Models by : Zhongmin Qian

Download or read book Option Valuation Formula for General Garch-in-Mean Models written by Zhongmin Qian and published by . This book was released on 2018 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: We derive option pricing formulas based on general GARCH-M models by using risk-neutral arguments. These formulas are beautiful in nature and realistic for applications. We propose a parameter estimation procedure and employ Monte Carlo method to evaluate the price. Demonstrations of these formulas applying to S&P 500 index options are shown. Empirical evidence suggests that both in U.S. stock market and Chinese financial market the performances of these theoretical pricing formulas are better than the results via Black-Scholes' pricing formula with constant volatility.

Introduction to Time Series and Forecasting

Author : Peter J. Brockwell
Publisher : Springer Science & Business Media
ISBN 13 : 1475725264
Total Pages : 429 pages
Book Rating : 4.4/5 (757 download)

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Book Synopsis Introduction to Time Series and Forecasting by : Peter J. Brockwell

Download or read book Introduction to Time Series and Forecasting written by Peter J. Brockwell and published by Springer Science & Business Media. This book was released on 2013-03-14 with total page 429 pages. Available in PDF, EPUB and Kindle. Book excerpt: Some of the key mathematical results are stated without proof in order to make the underlying theory acccessible to a wider audience. The book assumes a knowledge only of basic calculus, matrix algebra, and elementary statistics. The emphasis is on methods and the analysis of data sets. The logic and tools of model-building for stationary and non-stationary time series are developed in detail and numerous exercises, many of which make use of the included computer package, provide the reader with ample opportunity to develop skills in this area. The core of the book covers stationary processes, ARMA and ARIMA processes, multivariate time series and state-space models, with an optional chapter on spectral analysis. Additional topics include harmonic regression, the Burg and Hannan-Rissanen algorithms, unit roots, regression with ARMA errors, structural models, the EM algorithm, generalized state-space models with applications to time series of count data, exponential smoothing, the Holt-Winters and ARAR forecasting algorithms, transfer function models and intervention analysis. Brief introducitons are also given to cointegration and to non-linear, continuous-time and long-memory models. The time series package included in the back of the book is a slightly modified version of the package ITSM, published separately as ITSM for Windows, by Springer-Verlag, 1994. It does not handle such large data sets as ITSM for Windows, but like the latter, runs on IBM-PC compatible computers under either DOS or Windows (version 3.1 or later). The programs are all menu-driven so that the reader can immediately apply the techniques in the book to time series data, with a minimal investment of time in the computational and algorithmic aspects of the analysis.

Analysis of the garch option pricing model using telebras calls

Author :
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (181 download)

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Book Synopsis Analysis of the garch option pricing model using telebras calls by :

Download or read book Analysis of the garch option pricing model using telebras calls written by and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Este trabalho procura confirmar a hipótese de o modelo de apreçamento de opções GARCH reduzir alguns dos já amplamente estudados vieses do modelo de Black & Scholes, utilizando opções de compra da Telebras no período julho de 1995 a junho de 2000. Para isso, comparam-se os preços encontrados por intermédio do modelo GARCH com os do modelo de Black & Scholes, cotejando-os com os preços de mercado. Os resultados indicaram que o modelo GARCH foi capaz de diminuir alguns dos vieses, principalmente para opções fora-do-dinheiro com curto tempo para o vencimento. Desta forma, o modelo GARCH se mostrou uma alternativa eficaz ao modelo de Black e Scholes, sobretudo para opções com pouca liquidez, nas quais não é possível a utilização da volatilidade implícita da equação de Black e Scholes.

An Option Pricing Formula for the GARCH Diffusion Model

Author :
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (631 download)

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Book Synopsis An Option Pricing Formula for the GARCH Diffusion Model by :

Download or read book An Option Pricing Formula for the GARCH Diffusion Model written by and published by . This book was released on with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this thesis, we derive an analytical closed-form approximation for European option prices under the GARCH diffusion model, where the price is driven by a geometric process and the variance by an uncorrelated mean reverting geometric process. This result has several important implications. First and foremost, these conditional moments allow us to obtain an analytical closed-form approximation for European option prices under the GARCH diffusion model. This approximation can be easily implemented in any standard software package. As we will show using Monte Carlo simulations, this approximation is very accurate across different strikes and maturities for a large set of reasonable parameters. Secondly, our analytical approximation allows to easily study volatility surfaces induced by GARCH diffusion models. Thirdly, the conditional moments of the integrated variance implied by the GARCH diffusion process generalize the conditional moments derived by Hull and White (1987) for log-normal variance processes. Finally, the conditional moments of the integrated variance can be used to estimate the continuous time parameters of the GARCH diffusion model using high frequency data. The thesis is organized as follows. Chapter 1 introduces stochastic volatility option pricing models and discusses in details the GARCH diffusion model and its properties. Chapter 2 presents the analytical approximation formula to price European options under the GARCH diffusion model. Using Monte Carlo simulations, we verify the accuracy of the approximation across different strike prices and times to maturity for different parameter choices. We investigate differences between option prices under the GARCH diffusion and the Black and Scholes model. Then, we qualitatively study implied volatility surfaces induced by the GARCH diffusion. Chapter 3 studies the accuracy of the inference results on the GARCH diffusion model based on the Nelson's theory. Using such a procedure, we fit the GARCH diffusi.

Emerging Intelligent Computing Technology and Applications

Author : De-Shuang Huang
Publisher : Springer
ISBN 13 : 3642040705
Total Pages : 1156 pages
Book Rating : 4.6/5 (42 download)

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Book Synopsis Emerging Intelligent Computing Technology and Applications by : De-Shuang Huang

Download or read book Emerging Intelligent Computing Technology and Applications written by De-Shuang Huang and published by Springer. This book was released on 2009-09-19 with total page 1156 pages. Available in PDF, EPUB and Kindle. Book excerpt: The International Conference on Intelligent Computing (ICIC) was formed to provide an annual forum dedicated to the emerging and challenging topics in artificial intelligence, machine learning, bioinformatics, and computational biology, etc. It aims to bring - gether researchers and practitioners from both academia and industry to share ideas, problems, and solutions related to the multifaceted aspects of intelligent computing. ICIC 2009, held in Ulsan, Korea, September 16–19, 2009, constituted the 5th - ternational Conference on Intelligent Computing. It built upon the success of ICIC 2008, ICIC 2007, ICIC 2006, and ICIC 2005 held in Shanghai, Qingdao, Kunming, and Hefei, China, 2008, 2007, 2006, and 2005, respectively. This year, the conference concentrated mainly on the theories and methodologies as well as the emerging applications of intelligent computing. Its aim was to unify the p- ture of contemporary intelligent computing techniques as an integral concept that hi- lights the trends in advanced computational intelligence and bridges theoretical research with applications. Therefore, the theme for this conference was “Emerging Intelligent Computing Technology and Applications.” Papers focusing on this theme were solicited, addressing theories, methodologies, and applications in science and technology.

GARCH Option Pricing with Implied Volatility

Author : B. Wade Brorsen
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)

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Book Synopsis GARCH Option Pricing with Implied Volatility by : B. Wade Brorsen

Download or read book GARCH Option Pricing with Implied Volatility written by B. Wade Brorsen and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Generalized autoregressive conditional heteroskedasticity (GARCH) option pricing models (OPM) with historical volatility have proven superior to the log-normality assumption of the Black option pricing model with historical volatility. This paper estimates implied volatilities from GARCH OPM. The estimated implied volatilities are used to forecast option premia. The GARCH implied volatilities are more stable than the Black implied volatilities. The GARCH OPM with implied volatility should provide better guidance to market makers and arbitragers than the Black option pricing model with implied volatility for options ranging from six to sixteen days to maturity. For options ranging from 21 to 50 days to maturity the Black OPM with implied volatility should provide better guidance to market makers and arbitragers than the GARCH OPM with implied volatility.