The key problem for option pricing in Garch models is that the risk-neutral distribution of the underlying at maturity is unknown. Heston and Nandi solved this problem by computing the characteristic function of the underlying by a recursive procedure. Following the same idea, Christoffersen, Heston and Jacobs proposed a Garch-like model with inverse Gaussian innovations and recently Bellini and Mercuri obtained a similar procedure in a model with Gamma innovations. We present a model with tempered stable innovations that encompasses both the CHJ and the BM models as special cases. The proposed model is calibrated on S&P500 closing option prices and its performance is compared with the CHJ, the BM and the Heston–Nandi models.
Mercuri, L. (2008). Option pricing in a Garch model with tempered stable innovations. FINANCE RESEARCH LETTERS, 5(3), 172-182 [10.1016/j.frl.2008.05.003].
|Citazione:||Mercuri, L. (2008). Option pricing in a Garch model with tempered stable innovations. FINANCE RESEARCH LETTERS, 5(3), 172-182 [10.1016/j.frl.2008.05.003].|
|Tipo:||Articolo in rivista - Articolo scientifico|
|Carattere della pubblicazione:||Scientifica|
|Titolo:||Option pricing in a Garch model with tempered stable innovations|
|Data di pubblicazione:||2008|
|Rivista:||FINANCE RESEARCH LETTERS|
|Digital Object Identifier (DOI):||http://dx.doi.org/10.1016/j.frl.2008.05.003|
|Appare nelle tipologie:||01 - Articolo su rivista|