Abstract
In Duan, Gauthier and Simonato (1999), an analytical approximate formula for European options in the GARCH framework was developed. The formula is however restricted to the nonlinear asymmetric GARCH model. This paper extends the same approach to two other important GARCH specifications GJR-GARCH and EGARCH. We provide the corresponding formulas and study their numerical performance. keywords: Option pricing, EGARCH, GJR-GARCH, analytical approximation Duan is with Rotman School of Management, University of Toronto; Gauthier and Simonato are with HEC Montreal; Sasseville is a Ph.D. candidate at the Kellog Graduate Business School. Duan, Gauthier and Simonato acknowledge the financial support from the Natural Sciences and Engineering Research Council of Canada (NSERC), Les Fonds pour la Formation de Chercheurs et l’Aide a la Recherche du Quebec (FCAR) and from the Social Sciences and Humanities Research Council of Canada (SSHRC). Duan also acknowledges support received as the Manulife Chair in Financial Services.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
