Univariate and Multivariate GARCH Models Applied to Bitcoin Futures Option Pricing

Pierre J. Venter and Eben Maré
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Pierre J. Venter: Department of Actuarial Science, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa
Eben Maré: Department of Mathematics and Applied Mathematics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

JRFM, 2021, vol. 14, issue 6, 1-14

Abstract: In this paper, the Heston–Nandi futures option pricing model is applied to Bitcoin futures options. The model prices are compared to market prices to give an indication of the pricing performance. In addition, a multivariate Bitcoin futures option pricing methodology based on a multivatiate GARCH model is developed. The empirical results show that a symmetric model is a better fit when applied to Bitcoin futures returns, and also produces more accurate option prices compared to market prices for two out of three expiry dates considered.

Keywords: Bitcoin; GARCH; futures options; multivariate (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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