Bayesian Option Pricing Using Asymmetric GARCH
Luc Bauwens () and
Michel Lubrano ()
G.R.E.Q.A.M. from Universite Aix-Marseille III
This paper shows how one can compute option prices from a Bayesian inference viewpoint, using an econometric model for the dynamics of the return and of the volatility of the underlying asset. The proposed evaluation of an option is the predictive expectation of its payoff function. The predictive distribution of this function provides a natural metric with respect to which the predictive option price, or other option evaluations, can be gauged.
Keywords: PRICING; SIMULATION (search for similar items in EconPapers)
JEL-codes: C11 C15 C22 G13 (search for similar items in EconPapers)
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Working Paper: Bayesian option pricing using asymmetric GARCH (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:aixmeq:97a40
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