All Questions
Tagged with garch stochastic-volatility
17 questions
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GARCH option pricing
I have been trying to implement GARCH(1,1) model for pricing call options. Suppose I have calibrated Garch(1,1) model for modelling the conditional volatility using the historical data of an equity ...
3
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What is the relationship between the estimated GARCH(1,1) conditional volatility and the true conditional volatility
Suppose that the data has been generated by a GARCH(1,1) model, i.e.
\begin{align}
y_t &= h_t \epsilon_t, \; \epsilon_t \sim N(0,1) \\
h_t &= \alpha_0 + \alpha_1 \epsilon_{t-1}^2 + \...
- 2,536
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Heston Nandi Garch Implementation Problem for Python
I have a coded my own Garch class in order to implement the Heston-Nandi Garch model.
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- 456
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535
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Heston model vs. GARCH
Heston model is a stochastic volatility extension of the Black-Scholes model. On the other hand, there is also closed-form expression for option pricing that uses GARCH stochastic volatility model. ...
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1
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How to project 1 Year ATM Implied volatility for SPX 500 1Year from now? Final goal is to calculate 1 Year Call prices on SPX 500 1 year from now?
I have the historical data for 1Year ATM Implied Volatility on SPX 500. I want to simulate the 1 year call option prices 1 year from now. What methods and approaches do I need to use? (Heston,GARCH, ...
CommunityBot
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2
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1
answer
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How do you handle implied volatility performing a VaR Monte-Carlo simulation using a stochastic volatility process calibrated on the underlying
Say you have a portfolio consisting of options each having a market implied volatility. If you now use some stochastic volatility model like GARCH to calibrate the real world volatility of the ...
CommunityBot
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Can you approximate stochastic volatility processes using GARCH processes?
Let me specific. Suppose that you have the following process:
\begin{align}
z_t &= \sigma_t \epsilon_t \\
\sigma_t &= \sigma \exp \left( \frac{v_t}{2} \right)
\end{align}
where $v_t$...
- 2,536
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Modelling volatility for higher frequency data
I'm doing some academic work on volatility forecasting. I've got 1-minute bar data. It is not clear to me what model is best suited for forecasting volatility when higher frequency data is available.
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- 472
2
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2
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930
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What is the difference between parametric and non-parametric models?
I'm reading about volatility modelling and I came across the concept of parametric and non-parametric models. For example, GARCH is a parametric model and Realized Volatility is a non-parametric model....
- 4,329
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What stochastic volatility models are industry standard for option pricing and how do they work?
I've started reading up on stochastic volatility models and it seems very difficult to discern which ones are used in practice and which have been mostly left alone in theory. What are the popular ...
- 2,536
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Fitting a forecasting S&P500 roll volatilities
I have a time series of S&P500 prices, for which I have calculated log-returns and roll-volatility. My goal is to forecast daily realized volatility and test a straddle strategy based on it (I ...
- 821
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4
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5k
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Stock Price Behavior and GARCH
In my (limited) understanding, the behavior of a stock price can be modeled using Geometric Brownian Motion (GBM). According to the Hull book I'm currently reading, the discrete-time version of this ...
- 11.2k
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1
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Ljung_Box Statistic of R and R^2 values in Return analysis
I have found a result that I find truly puzzling. Here is an extract from a GARCH-Analysis I have performed:
Test______________Statistic_______p-Value
Ljung-Box Test_____R Q(10)_____0.4047773
...
CommunityBot
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8
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1
answer
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How can I compare 30 day implied volatility forecasts with GARCH forecasts?
I'm trying to understand whether there is a good way to compare forecasts for volatility from different sources i.e., implied volatility and GARCH. I'll outline a few statements that I believe and if ...
CommunityBot
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3
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245
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When to use SV or a GARCH model
So i have been searching for this answer for a question if there is a rule or something that would say when to use GARCH type model or use an stochastic volatility model to predict the volatility of ...
7
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1
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Filtering out AR(1) effects before using stochastic volatility model
I wonder if I first filter out AR(1) (autoregressive model with lag 1) effects from univariate time series and then fit stochastic volatility model does above procedure introduce any bias at first or ...
2
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1
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2k
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using garch to forecast volatility but getting low persistence model
I am using a GARCH(1, 1) model to try model volatility for a certain stock.
I have a GARCH function in matlab that returns the three parameters, omega, alpha & beta.
I then use this parameters ...
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