GARCH Option Valuation: Theory and Evidence

Peter Christoffersen, Kris Jacobs () and Chayawat Ornthanalai
Additional contact information
Kris Jacobs: University of Houston and Tilburg University, Postal: Houston, TX 77204-6021, United States
Chayawat Ornthanalai: Georgia Institute of Technology

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: We survey the theory and empirical evidence on GARCH option valuation models. Our treatment includes the range of functional forms available for the volatility dynamic, multifactor models, nonnormal shock distributions as well as style of pricing kernels typically used. Various strategies for empirical implementation are laid out and we also discuss the links between GARCH and stochastic volatility models. In the appendix we provide Matlab computer code for option pricing via Monte Carlo simulation for nonaffine models as well as Fourier inversion for affine models.

Keywords: GARCH; option valuation. (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Pages: 53
Date: 2012-05-08
New Economics Papers: this item is included in nep-cmp, nep-ets and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://repec.econ.au.dk/repec/creates/rp/12/rp12_50.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aah:create:2012-50

Access Statistics for this paper

More papers in CREATES Research Papers from Department of Economics and Business Economics, Aarhus University
Bibliographic data for series maintained by ().