SPEC Model Selection Algorithm for ARCH Models: an Options Pricing Evaluation Framework

Stavros Degiannakis and Evdokia Xekalaki

MPRA Paper from University Library of Munich, Germany

Abstract: A number of single ARCH model-based methods of predicting volatility are compared to Degiannakis and Xekalaki’s (2005) poly-model SPEC algorithm method in terms of profits from trading actual options of the S&P500 index returns. The results show that traders using the standardized prediction error criterion (SPEC) for deciding which model’s forecasts to use at any given point in time achieve the highest profits.

Keywords: ARCH models; Model selection; SPEC (search for similar items in EconPapers)
JEL-codes: C12 C40 C5 C52 C53 G12 G17 (search for similar items in EconPapers)
Date: 2008
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Published in Applied Financial Economics Letters 4.6(2008): pp. 419-423

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Journal Article: SPEC model selection algorithm for ARCH models: an options pricing evaluation framework (2008)
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