ARCH Models and Option Pricing: The Continuous Time Connection

Fabio Fornari () and Antonio Mele

Working Papers from Paris X - Nanterre, U.F.R. de Sc. Ec. Gest. Maths Infor.

Abstract: To implement continuous time option pricing models in which ARCH models can be used as direct or indirect approximators of stochastic volatility, we construct continuous time economies exhibiting equilibrium dynamics to which most asymmetric ARCH models converge in distribution as the sample frequency gets infinite.

Keywords: PRICING; ECONOMIC MODELS; STOCHASTIC MODELS mathematiques et informatique, 200, avenue de la Republique 9 2001 Nanterre CEDEX. 41p. (search for similar items in EconPapers)
JEL-codes: D50 D52 (search for similar items in EconPapers)
Date: 1998
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Related works:
Working Paper: ARCH Models and Option Pricing: the Continuous-Time Connection (1999)
Working Paper: ARCH Models and Option Pricing: The Continuous Time Connection (1998)
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