Option pricing for some stochastic volatility models

A. Thavaneswaran, J. Singh and S.S. Appadoo

Journal of Risk Finance, 2006, vol. 7, issue 4, 425-445

Abstract: Purpose - To study stochastic volatility in the pricing of options. Design/methodology/approach - Random‐coefficient autoregressive and generalized autoregressive conditional heteroscedastic models are studied. The option‐pricing formula is viewed as a moment of a truncated normal distribution. Findings - Kurtosis for RCA and for GARCH process is derived. Application of random coefficient GARCH kurtosis in analytical approximation of option pricing is discussed. Originality/value - Findings are useful in financial modeling.

Keywords: Stochastic modelling; Kurtosis; Pricing (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:15265940610688982

DOI: 10.1108/15265940610688982

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