GARCH option pricing models with Meixner innovations

Matthias Fengler and Alexander Melnikov ()

No 1702, Economics Working Paper Series from University of St. Gallen, School of Economics and Political Science

Abstract: The paper presents GARCH option pricing models with Meixner-distributed innovations. The risk-neutral dynamics are derived by means of the conditional Esscher transform. Assessing the option pricing performance both in-sample and out-of-sample, we find that the models compare favorably against the benchmark models. Simulations suggest that the driver of these results is the impact of conditional skewness and conditional excess kurtosis on option prices.

Keywords: GARCH models; Meixner distribution; Esscher transform; option pricing (search for similar items in EconPapers)
JEL-codes: C22 G13 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2017-02
New Economics Papers: this item is included in nep-age
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http://ux-tauri.unisg.ch/RePEc/usg/econwp/EWP-1702.pdf (application/pdf)

Related works:
Journal Article: GARCH option pricing models with Meixner innovations (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:econwp:2017:02

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