GARCH option pricing with implied volatility

N'zue Fofana and B Brorsen

Applied Economics Letters, 2001, vol. 8, issue 5, 335-340

Abstract: Generalized autoregressive conditional heteroskedasticity (GARCH) option pricing models (OPM) with historical volatility have proven superior to the log-normality assumption of the Black option pricing model with historical volatility. This paper estimates implied volatilities from GARCH OPM. The estimated implied volatilities are used to forecast option premia. The GARCH OPM with implied volatility provided more accurate estimates of option premia than the Black option pricing model with implied volatility for options ranging from six to sixteen days to maturity. For options ranging from 21 to 50 days to maturity the Black OPM with implied volatility was more accurate than the GARCH OPM with implied volatility.

Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

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:taf:apeclt:v:8:y:2001:i:5:p:335-340

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/135048501750157585

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().