All Questions
Tagged with garch option-pricing
19 questions
4
votes
0
answers
180
views
Black-Scholes implied volatility using a GARCH model
Why I'm not getting the same Black-Scholes implied volatility values as the ones given in the paper "Asset pricing with second-order Esscher transforms" (2012) by Monfort and Pegoraro?
The ...
2
votes
0
answers
128
views
Problem matching prices of Black-Scholes vs. GARCH(1,1) in Duan (1995)
In the paper of Duan (1995) the author compare European call option prices using Black-Scholes model vs. GARCH(1,1)-M model (GARCH-in-mean). To be brief, the author fits the following GARCH(1,1)-M ...
1
vote
1
answer
230
views
GARCH process simulation in R
I'm trying to learn how to simulate the GARCH(1,1) for option pricing using Monte Carlo. I need to learn how to code the equations for the stock log returns and the variance process. I'm trying to ...
0
votes
0
answers
241
views
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 ...
1
vote
0
answers
61
views
HNGARCHFIT in R (No standard deviations or P values printed)
When I estimate an HN-GARCH model using the hngarchfit() from the fOptions package in R, only the coefficient estimates are printed. There are no standard deviations or P-values printed. Does anyone ...
- 61
2
votes
0
answers
179
views
GARCH Option Pricing in R
I am trying to code a GARCH option pricing model in R. I am still new to R so this does seem a bit complicated.
I want to estimate an asymmetric GARCH model as well as an EGARCH model. This I have ...
- 61
2
votes
0
answers
138
views
HNGARCH Option Pricing in R (How to loop)
I am having difficulties when using the HNGOption program in R.
The program will only run for 1 specific option price, meaning that I would have to manually insert strike price etc. and this would ...
- 61
2
votes
0
answers
63
views
Calculating E^2[σ^2] where σ is a GARCH(1,1) Proces [closed]
Given that α = 0,113079 β = 0,873884 ω = 0,0000081
I need to calculate a call price using garch volatility; I also calculated the kurtosis = 235:
https://www.researchgate.net/publication/...
- 21
0
votes
0
answers
535
views
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. ...
- 1
0
votes
0
answers
75
views
EGARCH and GARCH effects with White Noise squared residuals
I'm asked to model a series which it's returns are white noise and after adjusting a regression like $r_t=c$ and looking it's squared residuals (white noise too) I'm asked to adjust a GARCH and EGARCH ...
1
vote
1
answer
325
views
Do you need to simulate the entire stock path for option pricing with GARCH?
I'm trying to price European options with a GARCH volatility model. What I have is a program that calibrates the GARCH volatility process for a stock which I intend to use to value a derivative on the ...
- 912
2
votes
1
answer
159
views
Maximizing a GARCH likelihood: Good practice on constraining solutions and initial values
I am currently working on option pricing model and I'd like to include a method for maximizing the likelihood of returns under the P measure. I am using the Heston and Nandi (2000) model:
\begin{align}...
- 2,536
2
votes
2
answers
837
views
Problem with the maximum likelihood for a GARCH-type of model
I'm currently working with the following GARCH process from Heston and Nandi (2000):
\begin{align*}
r_{t+1} - r_f &= \lambda h_{t+1} - \frac{h_{t+1}}{2} + \sqrt{h_{t+1}}z_{t+1} \\
h_{t+1} ...
- 2,536
5
votes
1
answer
1k
views
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 ...
- 912
2
votes
1
answer
596
views
Pricing options using the IG component GARCH model of BCHJ(2018)
Babaoglu, Christoffersen, Heston and Jacobs (2018) introduced a component GARCH model with inverse Gaussian innovations and an exponentially quadratic pricing kernel back in 2018. The article shouldn'...
- 2,536
1
vote
1
answer
722
views
Duan (1995) GARCH Option Pricing Model with MATLAB
This is the MATLAB code that replicates the option pricing model proposed by Duan in his paper "The GARCH Option Pricing Model". However, the parameters estimated in the file do not match with the ...
- 13
2
votes
0
answers
477
views
Unconditional variance of an E-GARCH model
I am attempting to calculate the unconditional variance of an E-GARCH model:
$$\log(h_{t+1}) = \beta_{0} + \beta_{1}\log(h_{t}) + \beta_{2}\left[|\varepsilon_{t} - \lambda| + \gamma(\varepsilon_{t} - \...
- 66
2
votes
0
answers
1k
views
GARCH Option Pricing Model (Duan 1995)
I am trying to replicate Duan's results from his 1995 Paper, "The GARCH Option Pricing Model". I have written this code in Python myself, and using his parameters I consistently seem to obtain results ...
- 21
2
votes
0
answers
418
views
Heston & Nandi GARCH model, parameters estimation from option data
I wonder if anybody has code for the HN-GARCH model where the parameters is NOT estimated with maximum likelihood and instead estimated by looking at the option data where an loss function is chosen ...
- 21